Jitters Spark Sell-Off; Broad Market Mixed
New worries about the U.S. economy’s health sparked a sell-off in financial and retail stocks Tuesday, but the broad market ended mixed.
Jitters triggered by rumors about Russian President Boris Yeltsin’s health, and concern that Brazil would announce a currency devaluation, also hurt sentiment.
On Wall Street, the Dow Jones industrials fell 66.17 points, or 0.8%, to 8,366.04, weighed down by declines in banking giant J.P. Morgan and in Wal-Mart.
“People forgot about the troubles around the world,” said Dan Mathisson, head stock trader at D.E. Shaw Securities. “Now there are a lot of international worries creeping back.”
Most broad market indexes also were lower, including the small-stock Russell 2,000 index, which eased 0.2% to 371.50--the first decline after nine consecutive gains.
But losers had only a small edge over winners on the New York Stock Exchange, and winners were in the lead on the Nasdaq market.
Financial and retail stocks, which have been rallying in recent weeks, fell back after the Conference Board said its consumer confidence index fell in October to the lowest level in nearly two years,
“Growing anxiety about the financial markets, combined with political concerns and recent layoff announcements, have given consumers the jitters,” said Conference Board economist Lynn Franco.
That weighed heavily on retail stocks, which are vulnerable to worries that the holiday shopping season could be a bust.
Wal-Mart shares slumped $2.13 to $63.25 and Dayton Hudson tumbled $3.13 to $39.94.
Bank and brokerage stocks, meanwhile, were hurt by the consumer confidence report and by renewed concern about Brazil.
“The market sold off because of rumors about Brazil devaluing and they probably will,” said Harry Laubscher, an analyst at brokerage Tucker Anthony.
The International Monetary Fund said Monday that it expects to unveil details of an aid package to Brazil today. Brazilian President Fernando Henrique Cardoso on Tuesday pledged budget cuts and unspecified tax hikes in his latest economic plan.
While U.S. stocks have rebounded sharply from their lows of late September and early October--helped by two interest rate cuts by the Federal Reserve Board--some Wall Street pros believe the gains will be labored going forward.
The Dow still is off 10.4% from its record high of 9,337.97 set July 17.
It may be difficult for the Dow to move above 8,500 points, a key “technical” level, unless there is some significant bullish news such as another interest rate cut by the Fed, analysts say. The central bank’s rate-setting committee next meets on Nov. 17.
In the bond market Tuesday, yields were mostly lower, with the 30-year Treasury bond falling to 5.08% from 5.11% on Monday.
The big news in bonds was that buyers returned in enough force to snap up some new corporate and municipal offerings--a sign that “credit crunch” concerns may be ebbing, as investors and lenders become more willing to extend credit.
Among Tuesday’s highlights:
* Bank and financial stocks that lost ground included Citigroup, off $2.75 to $43.56; Wells Fargo, down $5 to $361; BankAmerica, off $2.69 to $53.94; Chase Manhattan, down $2.50 to $52; and Merrill Lynch, down $3.56 to $51.38.
* Retail stocks hit hard included May Department Stores, down $2 to $59; Sears, down $1.19 to $43; Tandy, down $5.94 to $42.06; and Ross Stores, off $1.13 to $34.50.
* Profit-taking hit some tech shares, which had surged Monday. Apple lost $2.19 to $35.25, Intel was off $1.63 to $87.31 and Yahoo sank $4.81 to $123.75.
Also, Computer Sciences slumped $5.88 to $51.13 after its earnings report Monday apparently left some investors unimpressed.
But IBM rose $1.31 to $144.38, and traded at a record $146.81 intraday, after saying it would buy back as much as $3.5 billion of its stock.
European markets continued to rally after Italy cut interest rates Monday. The German market jumped 2.3% and the French market gained 2.9%. Asian markets were mixed, with Singapore up 3.6% and South Korea down 3.5%.
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Market Roundup, C10
