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Wall Street reels in pain
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October 8, 1998: 1:54 p.m. ET
Stocks suffer heavy pounding as dollar plunges, world recession looms
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NEW YORK (CNNfn) - Fear about the global economy, a plunging dollar and heavy losses in overseas stock markets continued to pound Wall Street in afternoon trading Thursday, sending share prices into a tumble and panicky investors out of the market.
Shortly before 1:30 p.m. the Dow Jones industrial average was down 204.42 points, or 2.7 percent, at 7,537.27. Trading volume on the New York Stock Exchange reached 695 million shares, with declines trouncing advances 2,888 to 306.
The Nasdaq Composite, bruised from three straight days of painful losses, once again led the pack, shedding 89.46 points, or 6.2 percent, to 1,373.15, falling almost 32 percent from its peak for the year, reached at 2,014.25 on July 20. The broad S&P 500 index fell 35.81, or 3.7 percent, to 934.87. (Click here for a look at today's CNNfn market movers.)
Overnight, stocks on Tokyo plunged nearly 6 percent as the yen's spectacular climb against the dollar continued. After losing 8 percent against the Japanese currency Wednesday, the dollar plunged another 4 percent overnight. But talk in the market that the Federal Reserve was looking at currency exchange rates, a possible signal the Fed is bracing for direct market intervention in defense of the dollar, helped pull the greenback off its lows.
Meanwhile, European stocks melted away, despite a 1/4 of a percentage point interest rate cut by the Bank of England. Just like the Federal Reserve's 1/4 point easing two weeks ago, the BOE's rate cut was deemed by market players as too little too late to stave off a looming economic slowdown.
Sounding a slightly bearish note, Goldman Sachs stock strategist Abby Joseph Cohen, one of the market's most resilient and respected bulls, lowered her earnings projections for S&P 500 companies. Cohen left her year-end projections for the Dow industrials and the S&P 500 intact, however, and said a recession is unlikely for the U.S. economy.
"We expect stock prices to reach new high levels during 1999," she wrote in a research report.
But Prudential Securities chief stock guru Greg Smith was a lot less optimistic about the market's near-term future, cutting both stock and bond allocations in his model portfolio and raising his cash position to 20 percent from 5 percent. Prudential's highly influential technical analyst Ralph Acampora slashed his target trading range for the Dow industrials to 6,500-7000 from 7,400-8,250. Acampora also lowered its target range for the S&P 500 to 745-870.
The bond market was mixed. The benchmark 30-year Treasury bond tumbled 1-12/32 points in price, raising the yield to 4.94 percent. But Treasury securities with shorter maturities traded higher, still attracting buyers amid the stock market melee.
Smell of blood
In stocks, market bears smelled blood and sharpened their claws on battered technology, Internet, financial and airline shares, even defensive drug stocks, as well as the stocks of companies whose earnings disappointed expectations.
On the Nasdaq, Dell Computer (DELL) plunged 7-11/16, or more than 15 percent, to 42-7/8, Microsoft (MSFT) shed 5-9/16 to 88-9/16 and Cisco Systems (CSCO) fell 7/8 to 43. Intel (INTC) fell 2-3/16 to 76-7/8.
Shares of Yahoo! (YHOO), the Internet portal whose third-quarter earnings, released late Wednesday, came in sharply above expectations, tumbled 11-1/8 to 103-1/4. Adding to sharp losses from the day before, shares of online book seller Amazon.com (AMZN) plunged 10-5/16, or more than 11 percent, to 83-1/8.
Among technology leaders on the Big Board, Dow component IBM (IBM) plunged 3 to 117-3/4, Compaq Computer (CPQ) lost 1-3/4 to 23-3/16 and America Online (AOL), the world's largest Internet service provider, shed 6-3/4 to 85-1/4.
In the financial-services corner, Citigroup (CCI), the freshly formed union of Citicorp and Travelers, plunged 2-5/8 to 29-1/8. The new Dow member, on its first morning of existence, warned investors that third-quarter income of the combined company likely will drop 53 percent from the same period last year, its Salomon Smith Barney trading unit will report a third-quarter net loss of about $325 million, and Citibank's corporate banking unit will lose about $130 million. Still, the company said things should turn around next year and 1999 core business results will be above actual pro-forma earnings reported for 1998 and 1997.
Elsewhere in the money sector, Chase Manhattan (CMB) fell 3-15/16 to 36-5/16, BankAmerica (BAC) lost 3-1/4 to 45-11/16 and Bankers Trust (BT) shed 2-9/16 to 45-5/8.
Dow member J.P Morgan (JPM) lost 1-5/8 to 72-7/8. American Express (AXP) shed 4-13/16 to 68-7/16. The stock got no help from Wednesday's announcement of an antitrust lawsuit by the Justice Department against Amex's biggest credit-card competitors, MasterCard International and Visa USA.
Airline stocks also shed blood, following Merrill Lynch downgrades for most of the sector's most prominent members. Shares of American Airlines parent AMR (AMR) lost 4-5/8 to 46-5/16, Delta Air Lines (DAL) shed 5-13/16 to 82-1/2 and United Airlines (UAL) fell 4-1/8 to 56-5/8. US Airways (U) fell 4 to 38. The Dow transports index dropped 154.42, or 6.3 percent, to 2,293.43.
Finally, even drug stocks, often viewed as a defensive investment in times of economic slowdowns and market turmoil, succumbed to the overall exodus. Shares of Dow member Merck (MRK) fell 1-7/8 to 123-15/16, Schering-Plough (SGP) lost 5/8 to 91 and Pfizer (PFE) shed 2-9/16 to 88-1/16. 
-- by staff writer Malina Poshtova Zang
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