Stocks Retreat on Asia Woes; Dollar Slumps
Stocks fell as the market, freshly reminded that the Asian backdrop is still grim, drew little solace from the resignation of Indonesian President Suharto after a week of deadly rioting in that country.
The Dow Jones industrial average dropped 39.11 points to 9,132.37. An early 30-point gain briefly put the blue-chip barometer within 10 points of May 13’s record close of 9,211.84.
Broader indexes also retreated despite some sharp gains on Asian markets following the latest developments in Indonesia.
Many observers expressed skepticism about Suharto’s decision to end his 32-year reign by naming his vice president to take his place.
Either way, analysts said, Indonesia is only one part of an Asian financial mess that’s looking increasingly difficult to contain and clean up.
Notably, in an appearance before Congress on Thursday, Federal Reserve Board Chairman Alan Greenspan and Treasury Secretary Robert Rubin stressed that the U.S. economy had not yet absorbed the full effect of the Asian crisis.
“We went through a denial phase when everybody said everything’s fine. The seriousness of this situation has not reached its peak,” said Don Hays, director of investment strategy at Wheat First Union in Richmond, Va.
Bond yields rose Thursday after the release of the minutes from the Fed’s March 31 policy meeting, which suggest that central bankers are ready to raise interest rates if the economy doesn’t slow. Bonds were also hit by a slump in the dollar.
The yield on the benchmark 30-year Treasury bond rose to 5.92% from 5.89% on Wednesday. The yield on the two-year note--more sensitive to Fed rate expectations--rose to 5.61% from 5.55%.
“This is a little bit of reality hitting home” for the bond market, said Nicholas Walsh, who manages about $1 billion in bonds for J & W Seligman & Co. “A lot of people are concerned about the strength of the economy.”
The dollar fell to 134.78 yen in late New York trading from 135.98 on Wednesday, on speculation the Bank of Japan might sell the U.S. currency to halt its advance against the yen.
The last time the Bank of Japan sold dollars for yen was in April, just before the Good Friday and Easter holidays. Traders fear the bank might repeat that strategy by selling dollars for yen going into the Memorial Day holiday weekend.
On Wall Street, shares of big-name technology companies, considered among the most vulnerable to the trouble overseas, took another beating Thursday. Last week, Hewlett-Packard and National Semiconductor both warned of weak profits, blaming Asia’s economic crisis for some of their problems.
Dell Computer slid $4.69 to $87.06 and Intel fell $2.94 to at $74.06, the two most active Nasdaq issues.
The Standard & Poor’s 500 fell 4.42 points to 1,114.64, and the technology-heavy Nasdaq composite index fell 10.76 points to 1,820.99.
Declining issues outnumbered advancers by a 7-6 margin on the New York Stock Exchange, where volume totaled 551.97 million shares, down from Wednesday’s 597.29 million.
The NYSE composite index fell 1.73 points to 576.90, and the American Stock Exchange composite index rose 0.14 point to 732.36.
The Russell 2000 index of smaller companies fell 1.35 points to 467.19.
Overseas, Tokyo’s Nikkei stock average rose 1.2%, and London’s FTSE-100 rose 0.6%. German markets were closed for a holiday.
Among Thursday’s highlights:
* Loehmann’s rose $1.69, or 38%, to $6.19 after the clothing retailer said earnings for its fiscal first quarter beat expectations.
* Ford Motor rose $1.88, or 3.8%, to $51.13 after the auto maker said it will report higher second-quarter earnings than expected.
