Stocks Continue Slide Ahead of Payroll Report
Stocks sank for a third straight session Thursday as Federal Reserve Board Chairman Alan Greenspan sidestepped the debate on interest rates and inflation in a speech just one day before a pivotal economic report.
The Dow Jones industrial average fell 77.97 points to 8,976.68, down 216 from Monday’s record high of 9,192.66.
A big loss in Walt Disney Co. weighed heavily on the Dow, which recovered from several slides below 9,000 before capitulating during the final hour.
The Standard & Poor’s 500 index fell 9.78 points to 1,095.14. The Nasdaq composite index declined 21.54 points to 1,835.14.
Declining issues outnumbered advancers by nearly a 2-1 margin on the New York Stock Exchange, where volume totaled a brisk 592.05 million shares.
Thursday’s selling came despite the sealing of the nearly $40-billion merger of Chrysler Corp. and Germany’s Daimler-Benz.
The prospect of merger mania in the auto industry wasn’t enough to steal the spotlight from Greenspan or today’s report on payroll and wage levels--a dominant force behind inflation.
Stocks seesawed last week amid conflicting signals on whether the inflation-leery Fed might try to slow the economy with higher interest rates.
But Greenspan, addressing an international banking conference in Chicago, provided no new clues on that debate. Instead, he spoke about improving world financial regulations to help prevent future Asian-style currency crises.
In his speech, Greenspan said bank regulators worldwide need to reform their practices and more quickly identify potential problems to prevent or at least cope with such instability.
Investors appeared to be little reassured by Fed Vice Chairwoman Alice Rivlin, who said that a desire to rein in a highflying stock market would not by itself be a reason for the central bank to raise interest rates.
The Fed is not considering changing margin requirements on stock trades, Rivlin said. There is no big risk of inflation taking off, she added.
There was limited reaction to reports on productivity and jobless claims indicating that upward pressure on companies’ operating costs--and prices--persist.
Blue chips were choppy for much of the session, with sentiment dented by ongoing woes in Asian markets.
“When you start to see the word ‘riot’ in headlines, it begins to make investors think the worst is not really over,” said Charlie Crane, chief strategist at Key Asset Management. “Asia is a big deal and will probably keep the Fed from raising rates, among other things.”
A third day of fierce rioting took place in Indonesia on Thursday, sending tremors through Asian markets.
Bonds were little changed. The yield on the benchmark 30-year Treasury bond rose to 5.95% from 5.93% on Wednesday.
On Wall Street, Chrysler rose $4.69 to $53.50 in New York Stock Exchange trading. Daimler’s American depositary receipts, which allow U.S. trading in the company’s stock, ended $2.19 lower at $106.38
Disney ended $5.19 lower at $119. Goldman Sachs reduced its 1998 and ’99 earnings estimates for the entertainment giant due to concerns over the cost of National Football League rights and a more conservative look at the film business.
The NYSE composite index fell 4.35 points to 570.22, and the American Stock Exchange composite index fell 1.08 points to 742.25. The Russell 2,000 index of smaller companies fell 3.41 points to 475.96.
Tokyo’s Nikkei-225 stock average fell 0.7%. In Europe, Frankfurt’s DAX index fell 0.8% and London’s FTSE-100 fell 0.9%.
Among Thursday’s market highlights:
* America Online jumped $3.19 to $89.69 after the company’s quarterly earnings handily beat Wall Street estimates. Late Wednesday, AOL reported income of $18.6 million, contrasted with a loss of $4.7 million a year ago. Lehman Bros. raised its earnings estimates and price target on AOL, calling the quarterly results a “blowout.”
* 3Com tumbled after some Wall Street analysts cut their earnings estimates for the company. The computer networker’s stock topped the most-active list on the Nasdaq, where it shed $2.28 to end at $32.13.
Market Roundup, D5
