Stock Sell-Off, Bond Rush Greet the President-Elect
This is supposed to be a honeymoon?
Wall Street greeted George W. Bush’s official anointing as president-elect with a broad stock sell-off Thursday and another rush into Treasury bonds.
Amid a new flood of corporate earnings warnings, the Nasdaq composite index sank 94.26 points, or 3.3%, to 2,728.51, its lowest close since Dec. 4. The index has lost 6.5% so far this week.
The Dow industrials fell 119.45 points, or 1.1%, to 10,674.99. The blue-chip Standard & Poor’s 500 index lost 1.4%.
The only good thing some analysts could say about Thursday was that the decline occurred on lower trading volume. Still, losers topped winners 26 to 12 on Nasdaq.
Despite probable investor relief that Bush is headed for the White House, “I guess we have to move on with the business of the economy, and it continues to be disappointing,” said Arthur Hogan, chief market analyst for Jefferies & Co.
Indeed, earnings warnings continue to pile up from companies in virtually every major sector of the economy, including banking, technology and consumer products.
Early in the day, merger partners Chase Manhattan and J.P. Morgan warned that fourth-quarter earnings will miss estimates--and be below third-quarter results--because of weakening trading revenue and higher merger expenses.
Chase fell $1.63 to $42.88 and Morgan lost $6.31 to $157.94.
The two banks said although their loan portfolios are performing “relatively well,” customers who trade with them are trading less--a warning that dragged other investment bank shares lower.
After the market closed, software king Microsoft warned that its quarterly results will be below expectations, dragging its shares down in after-hours activity.
Despite upbeat earnings reports from some other tech giants, including Oracle and Adobe Systems, all news seems to be bad news to many investors now, traders say. “The mood of the market is pretty dismal,” said Barry Berman, head trader for Robert W. Baird & Co.
That is reflected in the ongoing rush into Treasury securities, the classic safe-haven investment. Another wave of buying sent yields on longer-term Treasury issues to 18-month lows Thursday.
The 5-year T-note yield fell to 5.18% from 5.21% on Wednesday; the yield on the 10-year T-note fell to 5.21% from 5.25%.
Also, the 6-month T-bill yield fell below 6% for the first time since April. It closed at 5.99%.
The bond market rally also points to near-universal expectations that the Federal Reserve, at its meeting Tuesday, will strongly hint an official interest-rate cut is likely in 2001.
Among Thursday’s highlights:
* Financial shares falling after the Chase/J.P. Morgan warning included Citigroup, down $2.25 to $50.75; Merrill Lynch, down $3.19 to $63.88; Morgan Stanley Dean Witter, down $7.06 to $68.19; and Legg Mason, down $2.44 to $51.06.
* Networking and software stocks were weak even ahead of Microsoft’s announcement. Juniper Networks fell $18.75 to $136.25, Sycamore Networks slid $8.81 to $54.75, Macromedia lost $7.25 to $65.25 and Veritas Software fell $11.13 to $93.75.
But Nortel Networks rose $2.31 to $38.75 after the biggest maker of fiber-optic equipment said it still expects to meet sales and profit forecasts for this quarter and 2001.
Fiber-optic giant Corning, however, fell $2.44 to $70 even though it also issued a bullish earnings outlook.
* Package shippers United Parcel Service and FedEx lumped after both warned of slower-than-expected holiday shipments. UPS lost $3.94 to $58.69; FedEx fell $4.31 to $41.97.
* Troubled Xerox gained 63 cents to $6.31 after saying it is selling its manufacturing, sales and service unit in China and Hong Kong to Fuji Xerox for $550 million, under a program to raise cash.
Market Roundup: C7, C8
