Stocks in Broad Slide; Dow Off 124
Stocks ended sharply lower Wednesday as investors cashed in some recent profits, and as Brazil’s currency hit a new low.
But many Internet-related stocks zoomed again.
The Dow Jones industrial average broke a two-day winning streak, dropping 124.35 points, or 1.3%, to close at 9,200.23.
The Nasdaq composite, which hit a record high on Tuesday, lost 1.1% as some big-name tech shares fell.
Losers topped winners by nearly 2 to 1 on the New York Stock Exchange and by 24 to 16 on Nasdaq in active trading.
Concerns that recession will spread throughout Latin America weighed heavily on the stocks of U.S. banks. The stocks also were hurt by news from First Union, one of the nation’s largest banks, that earnings growth this year will be weaker than expected, in part because of higher expenses.
The news from Brazil continued to be grim. The country’s currency, the real, lost another 3.7% to close at a record low of 1.91 to the dollar on Wednesday, despite a hike in interest rates that was designed to bolster confidence and slow investor flight.
Brazil abandoned its defense of the currency Jan. 13, and the real has since lost more than 50% of its value.
Brazil’s central bank raised its overnight bank lending rate to 35.5%, from 32.5%, a hike that will be passed along to consumer and business borrowers. Yet Brazil’s largest stock market shrugged off the increase, with the Bovespa index adding 0.6% to 7,647.
Higher interest rates are supposed to curb inflation and make Brazil more attractive to investors. But they will also increase its horrific fiscal deficit by raising the cost of borrowing. Latin America economist Arturo Porzecanski of ING Barings in New York said rates of 40% might be necessary to stop capital outflows that have totaled $8 billion this month.
Expectations rose that Brazil would announce a new fiscal initiative to cut its budget even further, possibly with massive layoffs of government employees. In Munich, World Bank President James Wolfensohn predicted that Brazil will soon unveil such a package and that it will help stabilize the currency and restore confidence.
The dollar, perhaps helped by a “flight to quality,” rose to a four-week high against the Japanese yen, ending at 115.82 yen versus 113.82 on Tuesday.
The U.S. bond market showed little reaction to events. An auction of two-year Treasury notes produced an average yield of 4.575%, as expected.
In commodity markets, a key index of commodity prices slipped to a fresh 21-year low, led down by platinum, hogs and sugar.
Among Wednesday’s highlights:
* IBM led major tech shares lower, falling $7.31 to $178.31. Also, Microsoft eased $2.94 to $168.63 and Intel lost $4.19 to $132.75.
* Among Internet stocks, online auctioneer EBay rocketed $82.63 to $303.50 after a strong earnings report Tuesday.
Other winners included Amazon.com, up $10.56 to $125.63; Broadcom, up $15.50 to $145; Ubid, up $17.50 to $89.94; and America Online, up $10.50 to $165.50.
* In the bank sector, First Union tumbled $4.88 to $52.19, J.P. Morgan fell $4.19 to $100.06, BankAmerica lost $2.81 to $62.13 and Citigroup was off $1.50 to $54.
* Borders Group fell $3.13 to $17.13 after the book retailer issued its second profit warning this month, saying storms are hurting January sales.
* Airline stocks declined after American Airlines’ chief executive said industry capacity is likely to exceed demand for air travel in 1999. American parent AMR slid $2.69 to $53.19, US Airways lost $2.94 to $46.06 and Delta dropped $2.19 to $49.31.
* Drug and biotech stocks were among the day’s big winners, with Pfizer up $1.81 to $121.94, Bristol Myers up $4.75 to $127.38, Amgen up $3.13 to a record $115.88 and Immunex up $4.94 to $147.94.
* Oil stocks suffered another sell-off even as some companies have reported better-than-expected earnings in recent days. Exxon lost $1.25 to $71 and Atlantic Richfield dropped $1.56 to $57.19.
* Gold stocks fell as the metal hit a five-month low. Barrick slid 44 cents to $18.31; Battle Mountain lost 13 cents to $3.88.
Market Roundup, C8
