Anxiety over Bill Clinton's presidency, weaker corporate profits and ailing world economies swept through the stock market again yesterday, resulting in a volatile session that battered some of the country's largest and most highly valued companies.
The Dow Jones industrial average fell 249.48 points, or 3.17 percent, to 7,615.54, leaving the index 3.7 percent in the red for the year. The index fell as much as 345 points during the day, but rallied in the last half-hour of trading.
The closely watched index of 30 blue-chip stocks has fallen 18.4 percent from its July 17 high of 9337.97 points.
In addition, the U.S. stock market, as measured by the Wilshire 5,000 index, has lost $2.4 trillion, or 19.3 percent, of its value
since July 17 and is now worth a little more than $10 trillion, according to Robert Wald, vice president of Wilshire Associates Inc. in Santa Monica, Calif. The index fell 2.6 percent yesterday.
"This has everything to do with what is happening on Capitol Hill," said Angel Mata Jr., head of listed equity trading at Baltimore-based Legg Mason Wood Walker Inc. "The market does not like uncertainty. This is the biggest uncertainty I have seen in a long time. We are talking about impeaching the president of the United States."
American Express fell $7.3125 to $69.375, accounting for 12 percent of the Dow average's drop. Merrill Lynch fell $3.75 to $55.50, bringing its loss since mid-July to 49 percent.
The only Dow average member to gain was Exxon Corp., up $1 to $69.6875.
The nervousness spilled into the broader market with the Standard & Poor's 500 stock index falling 26.01 points, or 2.58 percent, to 980.19.
General Electric Co. fell $3.1875 to $77 to lead the S & P's slide, even though the company said third-quarter revenue will rise 20 percent from the year-earlier period.
The Nasdaq composite index slipped 39.21 points, or 2.41 percent, to 1,585.34, led by technology heavyweights Microsoft Corp., down $1.50 to $100.75; Dell Computer Corp., off $2.125 to $55; and Cisco Systems Inc., down $2.375 to $88.4375.
Losers routed gainers on the New York Stock Exchange, with three stocks falling for every one that rose.
Trading was heavy with volume on the Big Board reaching 875.73 million shares, compared with 696.9 million Wednesday.
As the stock market fell, investors pumped money into treasury bonds, which are seen as a safe haven in troubling times. The yield on the benchmark 30-year Treasury fell to 5.17 percent, its lowest yield since the bonds started to be issued in 1977.
Experts blamed yesterday's decline on concerns about the Clinton presidency, weaker than expected corporate earnings, and fears that Asia's economic problems are seeping into Latin America and hurting corporations here.
"If you just add up all of the negatives, it is a long list," said Hugh Johnson, chief investment officer at Albany, N.Y.-based First Albany Corp. "This is just not a good combination."
The factors that roiled the market yesterday were the same that resulted in a 155-point loss for the Dow on Wednesday, when independent counsel Kenneth W. Starr sent to Congress his report on the White House sex scandal.
Stock market experts said the uncertainty of Clinton's future has had some affect on the market.
"One of the things that the market likes is stability," said Preston Athey, manager of the T. Rowe Price Small-Cap Value Fund, which has $1.5 billion under management. "The market does not like surprises."
Athey and other experts said stocks also fell on concerns that Latin America's economy is sputtering like the economies in Asia. Many large U.S. banks have made billions of dollars in loans in the region, and their stocks sank yesterday.
Citicorp, the country's second largest bank, fell $4.812 to $88.25; shares of Chase Manhattan Corp. closed at $42.75, down $1.875; and BankAmerica Corp. lost $3.25 to $56.125.
"The Asia problem is definitely having an impact," Athey said. "There is no question that the instability in several economies and markets around the world is beginning to take a toll on confidence in other markets."
Many analysts have been hoping that corporate profits will rise in the third and fourth quarters, but such optimism may not be warranted. Procter & Gamble, a bellwether stock viewed as a good defensive investment, surprised analysts Wednesday by saying that its fiscal first quarter earnings would fall short of expectations. Its shares fell for a second day yesterday to finish down $2.875 at $69; it has lost 12.45 percent of its value in the last five trading sessions.
Yesterday, the tone for the market was set at the opening bell and the Dow plunged nearly 258 points in the first 30 minutes of trading. Mata said volume was light in the afternoon, and that there were many investors trying to sell stocks and few willing to buy. The market rallied in the last half-hour of trading, jumping 96 points.
Experts expect similar gyrations throughout the year. The Dow has risen and fallen by more than 100 points in eight out of the last 10 trading sessions, including a 380-point gain Tuesday, and a 512 drop eight days ago.
"It is unbelievable," Johnson said.
He blamed the swings on heavy trading volume and money managers who buy and sell large chunks of stock.
"There is enormous pressure on managers to perform well," he said. "When the market is going up, they jump on board, when it is going down they jump off."
Morry Zolet, senior vice president of investments at Ferris, Baker Watts Inc. in Baltimore, said he was fielding calls from anxious investors. He said he has been putting in 16-hour days doing some "hand holding."
"People have definitely felt the pain, but it hasn't been long-standing enough for them to say, 'Enough is enough,' " Zolet said. "You just have to be a really patient investor."
Athey tried to put a brighter face on the market's condition.
"Sure we have given some back, but it is not like we are back to where we were five years ago," he said.
He said he has been selling stocks that have done well, and buying ones that have fallen with the hopes that they will rise when the market settles down and begins an upward trek.
"We haven't panicked," Athey said. "We are hanging in, looking for bargains."
Investors sought safety from the worldwide turmoil in gold stocks, which were pummeled over the last two years as bullion prices slid. Battle Mountain Gold Co. rose $1 to $4.875; Barrick Gold Corp. gained $1.5625 to $18.0625; and Newmont Mining Corp. rose $2.9375 to $20.9375.
Oil-related stocks jumped with the price of crude after a larger-than-expected drop in U.S. inventories.
Pub Date: 9/11/98