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Markets & Stocks
Dow crawls back from abyss
January 13, 1999: 11:38 a.m. ET

Stocks shake off initial selling shock, but Brazil problems keep Wall St. down
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NEW YORK (CNNfn) - U.S. stock markets recovered from a scalding wave of selling Wednesday, but remained sharply lower as investors felt the sting of global trouble as South America's largest economy, Brazil, devalued its currency and lost its top central banker.
     At around 11:15 a.m. the Dow Jones industrial average was down 173.78 points, or 1.8 percent, to 9,300.90, clawing its way back from a loss exceeding 260 points earlier in the day. Losers trounced gainers 2,336 to 541 as trading volume on the New York Stock Exchange climbed to 372 million shares.
     The Nasdaq Composite, which took the hardest hit in the morning, tumbling nearly 5 percent in the first half hour of trading, also crawled back, trading 20.79, or just under 1 percent, lower at 2,299.96. The S&P 500 index dropped 15.13, or 1.1 percent, to 1,224.38.
     What seemed close to panic selling when the market opened, came on the heels of severe losses in world markets after Brazil, allowed its currency, the real, to drop 8.6 percent against the dollar overnight, as U.S. currency reserves continued to flow out of the country at a torrid pace.
     The de facto devaluation, which was triggered by the surprise resignation of Gustavo Franco, the president of Brazil's central bank, unleashed heavy selling in the country's stock market, halting trading within about 15 minutes after the market open as the Bovespa index nose-dived more than 10 percent. Trading resumed after about 30 minutes, with the market cutting its losses in half and the Bovespa trading about 5 percent lower.
     The newly appointed interim Central Bank President Francisco Lopes, meanwhile, said the real could undergo a 12 percent devaluation against the dollar in the course of 1999.
     The unraveling of Brazil's financial markets came as the country's ability to face its international debt obligation was put in question after last week Brazil's third-largest state, Minas Gerais, declared a 90-day moratorium on debt payments to the federal government.
     The Minas Gerais moratorium also threatens the survival of a $41 billion international rescue package, backed by the United States and put together by the International Monetary Fund. But Demosthenes de Pinho Neto, international affairs director at Brazil's central bank, reassured investors Wednesday, that his country would stick to its 1999 fiscal targets, a critical condition if the IMF loan is to reach Brazilian shores.
     Meanwhile, swift bargain hunting helped Wall Street trim its early losses after the first wave of selling subsided.
     The bond market soared as investors from around the world sought the safety of debt backed by the U.S. government in the face of the latest wave of emerging market meltdown. The benchmark 30-year Treasury bond which rocketed more than 2 full points in the morning, retreated and traded 1-7/32 points higher in price, for a yield of 5.13 percent.
     The dollar fell sharply against the euro, rattled by fears that all of Latin America could be roiled by the Brazilian devaluation. The dollar traded slightly lower against the Japanese yen.
    
All bears breaking loose?

     In the stock market, selling was widespread, but the losses were worst among financial issues and Internet stocks.
     Paying the price for international market exposure, shares of blue-chip financial firms bled heavily. Among Dow components, Citigroup (C) tumbled 4 to 51-3/4, J.P. Morgan (JPM) lost 4-7/8 to 106-15/16 and American Express (AXP) dropped 2-15/16 to 99-7/16. Elsewhere, Chase Manhattan (CMB) shed 3-7/8 to 51-7/8 and BankAmerica (BAC) retreated 2-5/8 to 64-5/16.
     Among the day's newsmakers, Internet stocks were in for a nasty surprise, even after the sector's leader, Web portal Yahoo! (YHOO) late Tuesday reported stronger-than-expected earnings and announced a 2-for-1 stock split. After an early crumble, however, shares of Yahoo! recovered to trade down 2 at 400. BT Alex. Brown downgraded the stock to "buy" from "strong buy."
     Other Internet survivors included Amazon.com (AMZN), down 3/8 to 163, and America Online (AOL), off 3-5/8 to 150. AOL is teaming up with Bell Atlantic (BEL) to provide rapid Internet access to its customers.
     Blue-chip technology stocks also were caught in the early selling vortex, but computer chip leader Intel (INTC) escaped, rallying 4-5/16 to 139-7/8 after it too surprised investors with strong earnings late Tuesday.
     Shares of Ascend Communications (ASND) gained 4-15/16 to 79-7/8 after Lucent Technologies (LU) confirmed it would buy the maker of computer networking equipment for $20 billion in stock. Lucent's shares fell 4-7/8 to 103. Back to top
     -- by staff writer Malina Poshtova Zang

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.