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Asian winds blow again
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December 18, 1997: 5:11 p.m. ET
Worries about U.S. earnings after Asian crisis weigh heavily on stocks
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NEW YORK (CNNfn) - Heavy selling swept through Wall Street Thursday, as investors worried about how much the earnings of U.S. companies will suffer from the Asian turmoil and whether measures to rescue the region's economies will work.
Stocks in all market sectors were hit hard, but technology, financial and transportation shares suffered the worst.
The Dow Jones industrial average fell 110.91 points, or 1.39 percent, to close at 7,846.50. On the New York Stock Exchange, declines led advances 1,922 to 1,019 as more than 621 million shares changed hands.
Trading volume was also boosted by investors squaring their market positions ahead of Friday's "triple witching" -- a quarterly occurrence when futures and options on stock indexes expire at the same time.
Broader markets also lost ground, with the Nasdaq Composite down 24.18, or 1.56 percent, to 1,523.19 and the S&P 500 index off 10.24, or 1.06 percent, at 955.30.
But bonds got a lift from the stock market's troubles as well as from news that the U.S. trade deficit fell 13.7 percent in October. The price of the benchmark 30-year Treasury bond closed 29/32 higher, pushing its yield down to 5.93 percent.
Although little happened in Asian markets overnight, Wall Street seemed concerned about the impact of the region's financial turmoil on U.S. corporations. Investor fears were fueled by uncertainty over the effects of South Korea's presidential elections on a $60 billion International Monetary Fund rescue package. Worries about the Japanese government's ability to handle its country's financial woes also weighed in.
Bearish comments fuel sell-off
What some saw as bearish comments from Prudential Securities' market analyst Ralph Acampora, known for his strong bullish views, also added fuel to the sell-off.
Although he did not turn completely negative on the market, Acampora backed up from previously expressed views that the Dow is headed for 10,000 by June 1998. Instead, he said the market is likely to trade in a wide range throughout 1998, and it is not realistic to expect another year of greater than 20 percent returns as the pace of earnings slows down.
In Acampora's worst-case scenario, the market could lose 20 percent, which he sees as a buying opportunity.
Al Goldman, an analyst at A.G. Edwards, also said it is too early to speak about a bear market.
"I don't see an end to the bull market in the popular indexes," Goldman said.(WAV 157K) or (AIFF 157K)
Tech stocks lead the retreat
Technology stocks, Wall Street's most volatile sector in the past two months, led the market on the downside as investors cashed in on recent gains and worried about earnings in the wake of the Asian turbulence.
Among the losers, Cisco Systems (CSCO) fell 5/8 to 53-9/16, Dell (DELL) was down 4 to 80-3/4, Compaq (CPQ) lost 1-3/8 to 54-1/16, and IBM (IBM) slipped 2-1/8 to 99-7/8.
Microsoft (MSFT) shares added to their 3-7/16 drop Wednesday, falling another 4-3/4 to 130-7/8 a day after the Justice Dept. filed contempt charges against the software giant. A number of states also said they are mulling antitrust action against the company.
Financial stocks also suffered amid concerns about currency and trading losses related to the Far East. Shares of J.P. Morgan (JPM) fell 3-1/8 to 118-7/8 and Chase Manhattan (CMB) was down 2-7/8 to 109-1/8.
Aetna (AET) stock plunged 9-5/8, or more than 12 percent, to 69-1/4 after the sudden resignation of the chief financial officer at the insurance giant's U.S. Healthcare unit. The news led some analysts to think Aetna's financial shape may be worse than many had expected.
Elsewhere, Dow component Eastman Kodak (EK) sent investors a sign that its troubles are far from over, announcing it will take a $1.5 billion restructuring charge. Half of that will come from payments to the 16,600 workers the company plans to lay off. A little over a month ago Kodak said the charge would be $1 billion and the number of people to get pink slips would be 10,000. Its latest announcement pushed the stock up 1-1/2 to 58.
Another Dow component, AT&T (T), ended months of speculation by announcing early Thursday it is selling its Universal credit card business to Citicorp (CCI) for $3.5 billion. Citicorp is the nation's largest credit card issuer. Shares of AT&T rose 1-1/4 to 59-1/8 on the news while the stock of Citicorp fell 2-3/8 to 129-1/8.
Earnings warnings take their toll
Thursday also brought several new additions to the long list of companies to warn of disappointing earnings, adding to the fears of already jittery investors.
Among the newsmakers, Plexus (PLXS) lost 11, or 44 percent, to 14 after the company said slower sales will bring lower earnings in the first quarter of fiscal 1998. Plexus, which makes a variety of electronic products, topped the net losers list on the Nasdaq.
Also on the Nasdaq, Apogee Enterprises (APOG) announced its earnings will come in sharply below last year's 20 cents a share. Apogee, which makes glass products for the construction, commercial and automotive markets, blamed weakness in the replacement auto glass market. Its stock tumbled 5-3/4, or more than 35 percent, to 10-3/8.
Also joining the pack: American Pad & Paper (AGP), a maker of paper-based writing products, which said it expects a net loss for the fourth quarter and the full year because of delays in price, product and accounting changes. The stock fell 1-9/16 to 7-15/16.
Shortly after the closing bell Nike (NKE) reported earnings of 48 cents a share, down sharply from the 55 cents Wall Street expected and from the 60 cents a share the company earned a year earlier. Nike predicted a sharp slowdown in growth in 1998 and set a $1 billion share repurchase program. The stock closed 1-9/16 off at 41-3/4.
Finally, concerns about the impact of Asia's woes on airlines and other transportation stocks knocked 61.42 points, or 1.90 percent, off the Dow transports, leaving the index at 3,173.77.
"There are nagging concerns about what Asia may or may mean for the airlines," said John Pincavage, airline analyst at Dillon Read.
-- by staff writer Malina Poshtova Zang
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