A Bleak Week for Dow, a Dark Day for Brazil
Stocks closed out their busiest week in history with a wild but mixed showing Friday, leaving the Dow Jones industrial average with its second-worst weekly point loss ever. Its worst point drubbing came just a week earlier.
In the spirit of the market’s huge swings of late, Friday’s session was appropriately volatile. Only 30 minutes before the closing bell, the Dow industrials were down an additional 180 points, yet they roared back to cut the loss to 41.97 points, at 7,640.25.
Even so, the blue-chip gauge surrendered 411.43 points for the week, or 5.1%, after failing to fully recover from its 513-point plunge Monday. It plummeted 482 points the prior week.
On a percentage basis, those weekly point drops aren’t in the record books because of the market’s historically high levels. No matter: It’s still been a dreary episode for the market, which has been battered by investor concern about growing turmoil in the economies of Asia, Russia and Latin America and its potential for shaving U.S. corporate earnings.
The U.S. dollar, meanwhile, fell against other major currencies. And prices of government bonds again drew support from the weakness in stocks as investors sought refuge with Treasury securities. That pushed the yield on the benchmark 30-year Treasury bond down to 5.28% from 5.30% late Thursday.
The frenzied stock selling generated record volume for the week of 4.7 billion shares on the New York Stock Exchange, eclipsing the prior high of 4 billion shares in the week ended Oct. 31. That week included the Dow’s 554-point loss on Oct. 27 and 337-point rise on Oct. 28--still the worst and best daily point moves, respectively, in history.
Investors now get a three-day break--U.S. markets are closed for Labor Day on Monday--to take, well, stock of the market’s startling decline and review their portfolios.
There’s obviously a deep well of bearish sentiment on Wall Street now, and some analysts said the market’s inability to completely snap back from Monday’s debacle shows that it hasn’t reached a “bottom” level from which prices will now rally.
“You get this constant drip, drip, drip of negative news,” said Charles Vincent, co-director of equity research at PNC Bank Corp. “This ain’t going to be a good year.”
But others said they were encouraged by Friday’s action.
Alfred Goldman, technical analyst at A.G. Edwards & Sons in St. Louis, said the Dow “successfully tested,” or stayed above, its lows of earlier this week, which is a positive technical sign.
Also, much of the recent selling has come from mutual funds that were eager to raise cash for fear that the market’s pullback would spark huge redemptions by individual investors, he said. “But that didn’t occur,” and the funds’ bigger cash holdings now “mean buying power” for stocks, Goldman said.
The Dow Jones industrial average has lost ground in seven of the last eight sessions and, since peaking at 9,337.97 on July 17, has nose dived nearly 1,700 points, or 18.2%. That’s a huge “correction” for the market but falls short of the 20% drop that generally defines a bear market.
Yet other, broader indexes have given up 20% or more. For instance, the technology-laden Nasdaq composite index--which closed at 1,566.52 on Friday, down 5.34 points on the day--is off nearly 448 points from its record high reached July 20, a drop of 22%.
Some of those measures managed to finish in the black during Friday’s session, however, including the Russell 2,000 index of small-capitalization stocks, which edged up 0.78 point to 347.07.
Overall, it was virtually a draw between gainers and losers on the Big Board, where volume totaled 780 million shares for the day.
Major banks and other financial stocks were again pounded because of their exposure to Russia and other troubled foreign economies. But oil and oil-service issues rose sharply amid rising market prices for crude oil.
Citicorp skidded an additional $6 to $92.50, and the giant New York-based bank has now plunged nearly 50% since mid-July. It’s been nearly as bad for its proposed merger partner, Travelers Group, which lost an additional $2.06, to $39.06, on Friday.
Other highlights:
* In the rallying oil sector, Exxon rose $2.13 to $66.06, Chevron gained $2.19 to $77.88, and energy services leader Schlumberger was up $2.75 at $50.
* Blue-chip General Electric dropped $1.88 to $75.88 amid concern that both its industrial and financial-services groups will be hurt by foreign economic woes.
* Pfizer tumbled $4.50 to $95.38 after the giant drug maker was downgraded by Morgan Stanley, Dean Witter, Discover & Co.’s pharmaceuticals analyst, who raised concerns about slowing sales for Pfizer’s impotence drug, Viagra.
Meanwhile, foreign stock markets were mixed. Among benchmark indexes, Tokyo’s market fell 1.5%, while Hong Kong gained 2.3%. In London, the market was up 0.9%, and it rose 1.4% in Frankfurt.
In Mexico, the struggling Bolsa index lost an additional 57.22 points, or 1.8%, to 3,045.17, and it has now skidded 34% since mid-July.
The dollar sank to a nearly four-month low against the Japanese yen, dropping to 133.57 yen from 134.70 late Thursday. The greenback also hit a 9 1/2-month low against the German currency, falling to 1.7304 marks from 1.7309.
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Times wire services were used in compiling this report.
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Market Roundup, D4
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Seven-Week Slide
Turmoil in Asia, Russia and Latin America put the brakes on a historic eight-year bull market. The Dow Jones industrial average has tumbled 18.2% from its all-time high in July. From their respective peaks, the Nasdaq composite, heavily weighted with technology stocks, is down 22.8% and the small-stock Russell 2,000 has fallen 29.5%. Daily closes of the Dow since July 1:
July 17: Dow hits all-time high of 9,337.97
Aug. 26: Dow starts its 4-day plunge that shaves more than 1,000 points off the average
Friday: 7,640.25
Source: Bloomberg News
