Brazil Woes Rattle U.S. Stocks

Currency turmoil in Brazil ignited a firestorm of selling at the open of Wednesday's trading session, but bargain hunters quickly showed up, allowing U.S. stocks to finish well off their worst levels of the day.

The Dow Jones industrial average fell 125.12 points, or 1.3 percent, to 9,349.56. The gauge was dunked for a 261.58-point loss early on.

The Dow's financial components were dealt the biggest setbacks within the index. J.P. Morgan sank 5 1/4 to 106 9/16, American Express 3 11/16 to 98 11/16, and Citigroup 3 9/16 to 52 3/16.

The Brazilian central bank widened the band in which its currency, the real, can trade, amounting to a de facto devaluation of about 9 percent. Brazil has experienced a run on its currency, making it hard for the nation to defend the real at its current exchange rate, and forcing it to widen the trading band.

"The markets are worried that what has already spread to Brazil from elsewhere could spread from Brazil to other countries in Latin America including Mexico, a major trading partner," said Irwin Kellner, chief economist at CBS.MarketWatch.com and Weller professor of economics at Hofstra University.

In addition, Brazilian Central Bank President Gustavo Franco resigned. Wall Street had viewed Franco as a rock of stability in Brazil.

Latin America represents about 20 percent of U.S. exports and Brazil comprises about 45 percent of Latin America's economic output. Brazil accounts for a little more than 2 percent of all U.S. exports.

Brazil's benchmark Bovespa stock index initially freefell 10 percent before recovering. It closed off 5.1 percent.

In the bond market, the 30-year Treasury advanced 1 8/32, to yield 5.133 percent.

In Europe, London's FTSE 100 index lost 3.0 percent, Frankfurt's DAX index gave back 5.2 percent, and Paris' CAC 40 index forfeited 3.5 percent. European banks have more exposure to Latin America than do U.S. banks.

In the U.S., glistening earnings reports from Intel and Seagate Technology boosted sentiment in the technology complex, with semiconductor and disk drive groups moving out to chunky gains.

Most prominent Internet-related issues traded lower. Of the few Web winners, @Home rallied 5 3/4 to 105 3/4 after Prudential Securities raised its rating to "strong buy" from "buy." Go2Net appreciated 4 to 103.

The brokerage group was among the hardest-hit pockets of the market. Among brokers with a big exposure to online trading, E*Trade slumped 8 1/16 to 92 7/8, Ameritrade 8 to 51, and Charles Schwab 4 1/8 to 56 1/2. Also, Lehman Brothers shed 3 7/16 to 48 9/16 and Merrill Lynch eased 4 1/8 to 68 7/8.

In Wednesday's market indicators:

• The Standard & Poor's 500 Index fell 0.4 percent.
• New York Stock Exchange losers drubbed winners by 11 to 5.
• On the Big Board floor, volume rose 17 percent to 929 million shares.
• The Nasdaq Composite declined 0.2 percent.
• The Russell 2000 Index of small-compny stocks sank 0.6 percent.

Telecommunications equipment bellwether Lucent Technologies (LU) will buy wide-area networker Ascend Communications (ASND) in a $20 billion stock swap. Lucent shares shed 3 3/8 to 104 1/2 and Ascend stock improved 5 3/8 to 80 5/16.
• Yahoo! (YHOO) gave back 34 to 368 after losing as much as 70 points earlier. The Internet portal service reported fourth-quarter operating net of 21 cents a share, a nickel richer than most forecasts. Traffic at its Web site rose to an average of 167 million page views a day in December, up from 144 million in September. In addition, the company declared a two-for-one stock split.
• Intel (INTC) added 3 7/16 to 139. The semiconductor titan said it earned $1.19 a share in the fourth quarter, handily dispensing with Wall Street estimates of $1.07. In the year-earlier quarter, profits totaled 98 cents. J.P. Morgan lifted its opinion to "buy" from "market perform."
• Other chip stocks rose in sympathy with Intel. Applied Materials was ahead 1 7/16 to 54 7/8, Lattice Semiconductor 3 29/32 to 48 1/8, and Novellus Systems 2 3/16 to 68 3/16.
• Linear Technology (LLTC) rose 12 3/16 to 99 13/16. The maker of analog integrated circuits sidled past Street estimates by 2 cents with its fiscal second-quarter results of 59 cents a share. It set a two-for-one stock split.
• Seagate Technology (SEG) rose 2 11/16 to 41 5/8. The disk drive bellwether reported fiscal second-quarter net of 42 cents a share, smearing consensus estimates of 26 cents.
• Among other disk drive issues, Quantum advanced 1 5/8 to 27 7/16, Western Digital 7/8 to 20 3/8, Komag 1 3/8 to 15 1/4, and Hutchinson Technology 1 7/8 to 46.
• Widely-held technology issues closed with modest advances. Sun Microsystems climbed 3 7/16 to 96 13/16, data storage specialist EMC 1 13/16 to 92 5/16, Microsoft 1 5/8 to 143 13/16, MCI WorldCom 1 7/16 to 73 15/16, and Motorola 3 3/8 to 70 7/8.
• Ciena rose 2 3/4 to 17 3/8 on talk that the telecommunications equipment manufacturer might be a takeover candidate.
• Walt Disney (DIS) dipped 1 7/8 to 36 1/8. Merrill Lynch analyst Jessica Reif Cohen sliced her fiscal first-quarter earnings estimates for the media and entertainment giant to 23 cents a share from 27 cents due to soft Asian operations. The analyst also cut her fiscal 1999 view to 86 cents from 91 cents.