An edgy stock market gasped yesterday over fears that International Business Machines Corp.'s year-end numbers would be weaker than expected, and that Japanese firms will slow down their binge buying of U.S. Treasury securities.
The rumors rocked the Dow Jones industrial average, which fell nearly 130 points by lunch time, but managed to rally and end the day at 6,402.52 points, down 70.73.
Robert Freedman, chief investment officer of John Hancock Funds in Boston, which manages $23.5 billion in assets, said the market was affected by rumors throughout the day. One rumor had it that the United States was launching an attack on Iran. Another was that a high-profile Wall Street bull had turned bearish.
"I think the market has been jittery since Greenspan made his comments last week," he said.
Federal Reserve Chairman Alan Greenspan jarred markets worldwide in a speech Dec. 5, when he said U.S. stocks have been driven by "irrational exuberance."
Many believe that message was designed to cool U.S. stock markets. The day after Greenspan's speech, the Dow fell more than 100 points, then rallied to close at 6,381.94, down 55.16 points. Since then, it has steadily risen.
The Dow wasn't the only index to fall yesterday. The Standard & Poor's 500 index, which tracks many small companies, closed down 6.81 points to at 740.73, after being down 14.79. The Nasdaq composite index, home to technology stocks, fell 3.43 to 1,309.12, rebounding from a 21.04-point decline.
The Russell 2,000 index of small capitalization stocks recovered from a 5.79-point drop to close 3.60 lower at 357.70. The Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, plunged 72.43 to 7,177.89; the American Stock Exchange market value index dropped 6.87 to 583.92; and the S&P; midcap index lost 2.92 to 253.29.
Maryland stocks fell, led by Dart Group Corp.'s Class A shares and Alex. Brown Inc. Dart fell $2 to $92. Alex. Brown Inc. fell $1.75 to $67.625.
On the New York Stock Exchange, about four stocks fell for every one that rose.
Patrick C. Ryan, president of Ryan, Lee & Co., a McLean, Va.-based investment banking firm, said the stock market is becoming more volatile.
"If you look at today's charts on the Dow, you'll see lightning
bolts," he said. "Given the level where we are, a plus 100 or minus 100 day is clearly going to become common place. Everyday, there is a stock that has a crash and a sell-off."
Freedman said the market was also rattled yesterday by reports that Japanese firms will end their large purchases of U.S. Treasury debt securities. He also believes that investors are concerned about the strength of corporate earnings.
IBM's stock fell to $156.125 a share, down $1.625 yesterday on speculation that the company was going to release a report that would say that its profits are slowing down.
Fred McNeese, a spokesman for the Armonk, N.Y.-based computer maker, said the company wasn't issuing a statement about its profits.
As to the speculation about its fourth-quarter profits, he said, "We don't comment on rumors."
Despite the nervousness, Freedman said he's confident that yesterday's dip is "not a major move to the downside," because inflation remains low, interest rates are stable and the economy continues to grow at a steady place.
David Clogg, president of Chapin, Davis, a Baltimore-based brokerage firm, agreed. "I think right now it [the stock market] is still in a bull market fever mode," he said.
A late rally in semiconductor stocks, led by a record high for Intel, helped trim the market's losses.
Intel Corp. soared $7.75 to a record $136.875 after Merrill Lynch & Co., the country's biggest brokerage, raised next year's earnings estimate 17 percent to $9 a share, and said it expects Intel shares to reach $200 within a year.
Other large stocks also pushed higher during the day. Exxon Corp. gained 50 cents to $94.50; Philip Morris Cos. climbed $2.375 to $118.75, its fifth straight record, Microsoft Corp. gained $1.50 to a record $83.375; and UAL Corp. rose $2.125 to $64.25.
Union Carbide's warning that fourth-quarter profit will be hurt by rising raw material prices added to concern that corporate earnings may be weakening. Union Carbide slumped $2.625 to $42.25.
So-called "cyclical" stocks, such as chemical and appliance makers whose business is closely tied to economic swings, reacted worst to Union Carbide's announcement that fourth-quarter profits will be half last year's.
DuPont Co., another member of the Dow industrials, fell $2.50 to $92.625; Monsanto Co. dropped 87.5 cents to $39.875; Dow Chemical Co. lost $1.125 to $81.25; and Whirlpool Corp. slid $1.125 to $47.50.
Scholastic Corp., publisher of the Baby-sitters Club children's books, slumped $5.625 to $67.125. The company reported lower-than-expected fiscal second-quarter profit.
Springs Industries Inc. sank $3.125 to $43.625. The South Carolina-based towel and sheet maker said fourth-quarter and fiscal year earnings will fall short of forecasts because of proportionately higher sales of lower-priced, less profitable products.
Rock-Tenn Co. slid $4.50 to $18.50 after the company said lower shipments would push fiscal first-quarter earnings below last year's level.
Benchmark 30-year Treasury yields rose to 6.62 percent, the highest since early November, from 6.49 percent Tuesday.
The higher yields sank bank, mortgage and brokerage stocks. Among the biggest losers, Citicorp tumbled $2.75 to $101; Norwest Corp. fell $1 to $43.625; and NationsBank Corp. lost $1.375 to $96.125.
Federal Home Loan Bank Mortgage Corp. dropped 87.5 cents to $112.125; Federal National Mortgage Association fell $1.50 to $38; and Travelers Group Inc., parent of brokerage Smith Barney Inc., fell $1.125 to $43.
Falling share prices in the United States mirrored similar-sized declines in overseas markets.
Pub Date: 12/12/96