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Battered stocks take another dive

The worldwide drop in share prices resumed with waves of selling on Thursday, dragging down stock market indexes on six continents and sending Wall Street into another retreat.

The currency and economic crisis engulfing Asia _ and reverberating through wobbly stock markets there _ continues to worry investors in other parts of the world who fear a contagious economic slowdown. That has meant jitters from Tokyo to Wall Street.

On Thursday, after prices dropped in Hong Kong, Japan and Europe, the selling pressure reached New York and then slammed into Brazil and Argentina, where fears are growing that a banking and currency crisis might be unfolding.

Investors in the United States thwarted an early downturn Thursday, but a late selling binge sent the Dow Jones Industrial Average down 125 points, or 1.67 percent, to 7,381.67 _ about 10.6 percent off its record high set Aug. 6.

The losses appeared to send a signal to investors that Tuesday's huge rebound after Monday's selloff, when the Dow plummeted 554 points, might mean the American stock market is not yet prepared to resume its historic ascent.

"I don't think the crisis is over," said David Shulman, the bearish strategist at Salomon Brothers. "We're now getting a Latin American version of what happened in Asia, like the contagion has jumped the Pacific."

Although analysts have played down the economic threat to the U.S. economy, which remains robust, they say that investor faith in the stock market, and the idea that everything is perfect, have been breached in recent weeks.

"The prospect of unlimited growth was one of the underpinnings of the '90s bull market," Shulman said. "But that prospect is suspect for at least the next year."

Perhaps just as important, some analysts argue, is the psychological effect of seeing other bull markets topple. In Hong Kong, for instance, the main stock market index rode higher than almost any other, soaring 480 percent between late 1990 and its Sept. 7 peak this year. During the same period, the Dow was up as much as 250 percent at its peak.

Since then, the Hang Seng index has been battered, plunging 38 percent in two months, largely because of the economic and currency crisis that began in Thailand and swept across Malaysia, Singapore and Indonesia. In recent months, the old talk among Wall Street analysts of the great Asian Tigers degenerated into caustic remarks about real estate bubbles and "golf course capitalism."

Trading volume was again heavy, as more than 712-million shares changed hands, making Thursday the third-busiest day in history on the New York Stock Exchange after Tuesday and Wednesday.

In fact, this has already been the busiest trading week in history on the Big Board, with more than 3.3-billion shares traded in four sessions, easily obliterating last week's record of a little more than 3-billion shares.

That kind of activity, analysts say, is a sign that investors are worried that the recent turmoil could fester and that a big portion of the spectacular gains of the last three years could be erased.

"The market was discounting perfection, and we've been slowly finding out that the world's not perfect," said Gail Dudack, the chief investment strategist at UBS Securities. "And so now the consensus has disappeared."

The day got off to a bad start, as investors woke to learn that heavy selling had resumed in Europe and Asia overnight. In Germany, the DAX, an index of 30 blue-chip stocks, fell 1.5 percent. But in Japan, the selling was more pronounced, sending the Nikkei index down 2.9 percent.

In Chicago, the center of futures and options trading, the indexes were all negative. In New York, the Dow fell 100 points at the opening. But as the day progressed, the index swung between negative and positive. Through much of the day, though, a broad array of smaller stocks got battered. The Russell 2000 index of smaller company issues closed down 1.4 percent.

Technology issues, under pressure early after the prospects of Dell Computer and Intel were downgraded by analysts, slid throughout the day, sending the technology-heavy Nasdaq down 32.34 points, or 2 percent, to 1,570.41.

Banking issues also suffered over concerns that there could be large losses related to the currency crisis in Asia. The Standard & Poor's Bank index fell 3.2 percent on Thursday, taking down all 28 of the issues listed, led by BankAmerica, which dropped $3.31\ to $69.75.

The broader market was also battered. On the Big Board, 804 issues rose while 2,175 fell, and blue chips, which showed some strength early, suffered the worst at the close.

The S&P 500 fell 15.48 points, or 1.68 percent, to 903.68. And 26 of the 30 Dow component stocks fell, led by J.P. Morgan, which dropped $3.87{, to $110.37{.

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