Dow Regains Most of Loss Triggered by Rubin News
After a brief loss of nerve early Wednesday, investors shrugged off the resignation of Treasury Secretary Robert E. Rubin and went back to buying technology stocks.
The Dow Jones industrial average plunged 213 points, or 2%, when the Rubin news hit the market early in the day, but the blue-chip index quickly regained most of its losses. It closed at 11,000.37, down 25.78 points.
The broader market was mixed. Losers topped winners by 16 to 14 on the New York Stock Exchange, but fresh buying of tech stocks and other growth stocks sent the Standard & Poor’s 500 index up 8.39 points to a record 1,364.00, and the Nasdaq composite up 39.86 points, or 1.6%, to 2,606.54.
It was more of the same in the bond and currency markets. After an initial sell-off on the Rubin news, Treasury securities and the U.S. dollar both finished around where they had closed on Tuesday.
The departure of the most popular Treasury chief in Wall Street’s recent memory failed to shake markets for long partly because it had been telegraphed for months, noted Byron Wien, U.S. strategist at Morgan Stanley, Dean Witter.
Moreover, investors expect no economic policy changes from Rubin’s successor, Deputy Treasury Secretary Lawrence H. Summers, and they believe that Federal Reserve Chairman Alan Greenspan is as effective as Rubin at calming markets in times of turmoil, experts said.
Lehman Bros. investment strategist Jeffrey Applegate said the Clinton administration prepared a “perfect baton-toss” to Summers, gradually elevating Summers’ profile by making him the point man on the Asian economic crisis and letting him share the spotlight with Rubin and Greenspan in testimony before Congress.
“You’ve got to hand it to this administration. They are very market-savvy,” Applegate said.
Although Rubin and Summers share similar policy views, Rubin is a creature of Wall Street who made a fortune as a trader at Goldman Sachs, while Summers is an academic economist by trade.
Those differences could matter the next time investors need a reassuring word, some warned.
“Rubin knew how to say things without upsetting the markets,” said Christopher Low, economist at First Tennessee Capital Markets. “Summers doesn’t have that experience, so we’ll have to wait and see how he performs in a crisis.”
Overall, the stock market on Wednesday saw a return to the leaders of the last few years--tech stocks and consumer growth stocks--and a pullback in the industrial names that have been the recent leaders.
Yet some analysts noted that Rubin’s departure could be a bullish signal for the industrial stocks, because his timing suggests he believes the global economy now is set on the path of recovery.
In the bond market, early worries about Rubin caused prices to slide and the yield on the benchmark 30-year Treasury bond to rise to 5.88%--highest since last May 25.
Investors then sensed a buying opportunity, however, and started driving yields down. By the close the 30-year T-bond closed at 5.82%, down from 5.83% on Tuesday.
“They [bond investors] took it better than I would have guessed,” said Mario De Rose, chief bond strategist at brokerage Edward Jones in St. Louis. “As long as Greenspan is still at the Fed, people are confident,” he added.
The bond market’s rebound was all the more remarkable in light of another disappointing Treasury auction: $12 billion in 10-year T-notes were sold at a higher-than-expected yield of 5.51%.
The dollar also recovered from an early sell-off, finishing down slightly against the yen and up against the euro. Whatever weakness the Rubin news caused the dollar in European trading was offset by news that Russian President Boris N. Yeltsin fired his Cabinet.
Among Wednesday’s highlights:
* Tech stocks leading the market included Cisco Systems, up $6.88 to $118.75 after reporting higher earnings Tuesday; IBM, up $4.50 to a record $225.50; Qualcomm, up $7.06 to a record $116.56; and Sun Microsystems, up $4.81 to $65.13.
* Other major growth stocks rising included Procter & Gamble, up $1.31 to $92.94; Bristol Myers, up $2.81 to $69.13; and Charles Schwab, up $3.31 to $119.56.
* Oil shares slumped across the board as gasoline prices fell to their lowest level in a month on a report that refiners should have no problem meeting summer demand.
Exxon slid $2.56 to $79.06 and Chevron lost $3.38 to $94.69.
Market Roundup, C8
