Stocks spiraled lower Monday after further pressure on the Japanese yen sent Asian share prices reeling, casting further doubts on the pace of U.S. corporate earnings growth
The action was similar to that of Friday, with flight-to-quality buying pushing yields on U.S. Treasury bonds to record depths, while crude oil prices spilled to 12-year lows.
In its worst session in over five months, the Dow Jones Industrial Average was whacked for a 207.01-point loss, or 2.3 percent, to 8,627.93. In percentage terms, the barometer's loss was its greatest since Jan. 9, when it cratered 2.9 percent.
Since hitting a record intraday high of 9,262.16 on May 4, the Dow has stumbled 634.23 points, or 6.8 percent.
The decline compares with the Aug. 7, 1997-to-Oct. 28, 1997 plunge, in which the Dow tanked 1,328.17 points, or 16 percent, on an intraday basis. The autumn drop was the Dow's steepest since the bear market of July 1990 to October 1990. Then, it collapsed 634.65 points, or 21.2 percent, on a closing basis.
Catalyst in the current downdraft has been an earnings slowdown in corporate America, accentuated by fears that Asia's economic downturn will be deeper and longer-lasting than previously expected.
"I think we are at or very close to a bottom," said Alfred E. Goldman, director of technical market analysis at A.G. Edwards & Sons Inc. "Triple-witching tends to help, and we have a triple-witch on Friday."
Triple-witching refers to the near-simultaneous expiration of stock options, stock index options, and stock index futures contracts which takes place the third Friday of the last month of each quarter.
Goldman observed that 80 percent of all New York Stock Exchange stocks and 87 percent of all Nasdaq stocks have declined 10 percent or more.
"I think the market has held up very well when you step back and remember that the Dow was up 22 percent from its January low to its April high," he said. "So we were vulnerable to a correction -- good news, bad news, or no news. Asia is not going to tip our economy into a recession."
"If we can grow earnings 6 percent to 8 percent this year in the face of Asia and the eighth year of an economic recovery, that's darned good."
Within Monday's market, the decline was very broad. But trading volume was just slightly above average, far from the climactic levels that would normally coincide with a market bottom.
The technology sector was riddled with losses, yet showed relative strength by giving less ground than blue-chip averages.
In Asia, stocks were slaughtered, as the anemic Japanese currency ignited renewed fears that other Asian nations, including China, might devalue their own currencies.
Speculation that Hong Kong might de-link the Hong Kong dollar from the U.S. dollar contributed to a 5.7 percent tumble in Hong Kong's Hang Seng index. Nevertheless, Hong Kong's chief executive, Tung Chee-hwa, told an Australian business group, "We wil not change the policy [to keep the Hong Kong dollar pegged to the U.S. dollar]."
Also, South Korea's Seoul Composite index plunged 4.8 percent to an 11-year low, Thailand's SET index staggered 5.7 percent, and Malaysia's KLSE Composite withered 4.3 percent. Indonesia's Jakarta Composite gave back 0.5 percent. See full story.
Japan, for its part, saw its Nikkei 225 index retreat 1.3 percent. Friday, Japan's government said its economy contracted for the first full year since 1974, providing the first official declaration that the country is in a recession.
Japan's Economic Planning Agency said the country's gross domestic product for the fiscal year ended March 1998 declined 0.7 percent.
On the Big Board floor, turnover dwindled 8 percent to 587 million shares.
The Nasdaq Composite declined 1.7 percent. Declining issues led advancers by 3 to 1 in the Nasdaq Stock Market. Volume totaled 636 million shares.
In the bond market, the 30-year Treasury advanced 1 3/32, to yield 5.592 percent, a fresh record low. See Bond Report.
In special situations, Bay Networks (BAY) rose 2 3/8 to 30 3/4 after Canada's Northern Telecom (NT) said it will buy the computer networker for $9.1 billion in stock, or $38.21 a share. See full story.
A few other networking issues held up relatively well despite the uncertain market environment. Fore Systems climbed 1/2 to 23 5/8, 3Com 11/64 to 24 3/16, and Ascend Communications 1/4 to 49 3/4.
Albank Financial (ALBK) surged 13 1/4 to 64 3/4. Cleveland-based savings & loan Charter One Financial (COFI) will pay $1 billion in stock for the provider of mortgage loans, insurance products, and other financial services. Charter One shares lost 4 to 30 1/8.
Securities broker McDonald & Co. (MDD) put on 2 1/8 to 33 after agreeing to be acquired by fellow Cleveland-based firm KeyCorp (KEY) in a $653 million deal. Shares of KeyCorp, a regional bank, shed 1 1/8 to 35 3/4.
In other individual issues, Dow component Minnesota Mining & Manufacturing (MMM) backpedaled 5 7/8 to 81 after warning Wall Street that it sees second-quarter net of between 90 cents and 94 cents a share. Most analysts had expected $1.05. 3M blamed the Asian crisis for its revised outlook. See full story.
Broderbund Software (BROD) sagged 3 to 17 3/16. The educational and entertainment software developer, citing elevated levels of product returns and customer rebates, said it will likely post a loss of between 12 cents and 15 cents a share. Most analysts had anticipated a per-share profit of a penny. As well, Broderbund retained Donaldson Lufkin & Jenrette to explore strategic alternatives.
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