U.S. stocks suffered another dreary session Wednesday after a further crack in Russia's teetering financial system sent investors dashing for cover in markets around the globe.
The Dow Jones Industrial Average fell 79.30 points, or 0.9 percent, to 8,523.35. The key gauge was off as much as 135.17 points in morning trading and stood 206.22 points above the low of its current five-week pullback.
"It's a time to be bullish, both over the next 30 days and over the next six to nine months," said Paul Rabbitt, senior portfolio strategist at Oppenheimer & Co.
"With the flight to safety in full force around the world into the U.S. currency, we've had an increase in inflows into U.S. equities from global investors to $10 billion a month," Rabbitt pointed out. "That's a lot of money. That goes right to big-cap names, and that's where you will see the strength."
"In my mind, we're still in a bear market, a bear market that has really unfolded in the smaller-cap stocks," said Edward Wedbush, president of Wedbush Morgan Securities Inc.
Russia neglected to make a payment on some of its long-term debt Wednesday. The development is notable since it was assumed that last week's Russian moratorium on treasury paper maturing through December 1999 would not affect longer-term debt.
Its currency, the ruble, skidded, with the Russian central bank suspending dollar sales to its banks, a signal that it will not intervene in the currency market to support the flattened currency. On Tuesday, the ruble stumbled 10 percent vs. the U.S. dollar, its steepest drop in nearly four years. It fell 5 percent Wednesday before trading was halted.
Speculation mounted that the International Monetary Fund's $3.2 billion September loan installment to Russia is in jeopardy. Russia's benchmark RTS stock index fell 13.8 percent. It has crashed an astonishing 86 percent in the last year.
Germany, whose banks hold a hefty exposure to Russian debt, saw its DAX stock index fall 2.6 percent.
The worry among some global investors is that problems in the German banking system as a result of Russia's woes might spread throughout Europe.
In Asia, Tokyo's Nikkei 225 index retreated 1.4 percent to 14,866.03. The decline in the Tokyo market came after a logjam developed in the Diet, Japan's parliament. Opposition lawmakers, who are against the government's use of public funds to resuscitate ailing banks, boycotted an important parliamentary committee meeting. The action raised the specter of a stalemate.
In other market highlights Wednesday:
- The Standard & Poor's 500 Index fell 0.8 percent.
- New York Stock Exchange losers whipped winners by over 3 to 1.
- On the Big Board floor, turnover rose 1 percent to 675 million shares.
- The Nasdaq Composite declined 1.7 percent. Declining issues led advancers by 3.5 to 1 in the Nasdaq Stock Market. Volume totaled 683 million shares.
- The Russell 2000 Index of small-ompany stocks sank 2.4 percent.
- The 30-year Treasury advanced 4/32, to yield 5.422 percent.
- Heavy-equipment maker Harnischfeger Industries (HPH) declined 3 3/8 to 16 7/8 after checking in with a fiscal third-quarter loss of 83 cents a share, vastly worse than the 16-cent-a-share deficit expected by most analysts. The company will cut its workforce by 20 percent, or 3,100 employees. It sees depressed conditions extending into 1999 and reported weakness across all of its business segments.
- Applied Materials (AMAT) fell 1 7/8 to 29 9/16. After the close of Tuesday's trading, the benchmark semiconductor equipment maker said it would cut 2,000 jobs, or 15 percent of its workforce, and slash executive salaries by 10 percent. Applied cited fragile Asian economies, industry overcapacity, and the growing popularity of sub-$1,000 personal computers.
- Investors slammed shares of St. John Knits (SJK) for an 8-point loss, or 30 percent, to 18 1/2. The apparel manufacturer said third-quarter profits will be less than Wall Street had forecast. St. John cited soft sales in its retail division as the culprit.
- Regions Financial (RGBK) added 3 to 39 7/8. Standard & Poor's is making the stock a member of its S&P 500 index effective after the close of Thursday's trading.
- Fore Systems (FORE) sank 5 3/8 to 18 7/8. The computer networking interest will incur a second-quarter charge of between $1.80 and $2.20 a share related to its buy of Berkeley Networks. The acquisition is valued at as much as $250 million.
- Labor Ready (LBOR) slipped 3 1/16 to 18 1/2 on unconfirmed reports of questionable accounting methods. The temporary-help concern said the talk was without merit. The stock has lost about 38 percent over the last six trading days.
- LHS Group (LHSG) depreciated 3 3/8 to 47 1/8. The provider of billing and customer support services to the telecommunications industry said its president, Bruce T. Leonard, quit, citing family reasons. The stock had been on a roll, climbing from 1997's low of 9 to its July 21 high of 76 1/2. Wall Street projects earnings growth of 74 percent and 50 percent in 1998 and 1999, respectively.
- In the technology sector, Dell Computer gained 4 5/8 to 128 5/8, International Business Machines improved 2 1/4 to 130 3/4, and Lucent Technologies rose 3/8 to 87 3/8. But, virtually every other top-tier computer-related stock fell.