Hong Kong meltdown sends global markets reeling
NEW YORK (DBC) -- U.S. shares were rocked Thursday afternoon, taking their cue from a meltdown in Hong Kong
shares and its resultant effect on global financial markets.
The selling in U.S. stocks was exceptionally broad-based, with losers trouncing winners by a 5-to-1 margin. Volume on
the floor of the New York Stock Exchange was extremely heavy.
Overseas, Hong Kong's Hang Seng index freefell more than 10 percent after tanking as much as 15 percent intraday.
The average has staggered nearly 25 percent in the last several days amid currency and interest rate turmoil. For full
story.
Meanwhile, Japan's 225-stock Nikkei index dove 3.0 percent and London's FTSE 100 index crumbled 3.6 percent.
At 12:06 p.m. ET, the Dow Jones Industrial Average plummeted 144.15 points, or 1.8 percent, to 7890.06. The index
tumbled as much as 180 points by 10:07 a.m. ET.
Weakest sector of the U.S. market was that of technology, benchmark computer-related and semiconductor issues in
particular. Otherwise, some strength was seen in scattered consumer noncyclical names in addition to the gold-mining
group.
"If I held a stock index, I would be selling," said Michael Metz, chief investment strategist at Oppenheimer & Co. "I
think [blue-chip] indexes have seen their high into 1998. What's going on is very bullish for gold, so I'd certainly buy
Newmont Mining or Homestake Mining. I would lighten up on the technology sector as I think this is not good news for
these stocks and I'd lighten up on the banks because I feel this may have repercussions for them."
The Standard & Poor's 500 Index fell 1.5 percent, the New York Stock Exchange Composite sank 1.5 percent, and the
American Stock Exchange Composite lost 1.3 percent.
New York Stock Exchange losers blew away winners by 5 to 1.
On the Big Board floor, 312 million shares crossed the tape, 6 percent greater than Wednesday's pace at this time.
The Nasdaq Composite fell 1.6 percent. Declining issues led advancers by 4 to 1 in the Nasdaq Stock Market. Volume
totaled 385 million shares.
"I think you stick to special situations and value stocks," Metz said. "I think the earnings momentum school is going to
have problems here. Frankly, I'd shop in the underowned mid-cap and small-cap universe. I believe the values lie in basic
resource issues. What's happening in southeast Asia is probably not terribly bullish for them, but I think they're cheap
enough, particularly the aluminum sector, which to me is compellingly attractive.
"In the small-cap sector, I like Genome Therapeutics, a biotech company that's big in cash and rather cheap at 9 3/8. I
think it's a very interesting speculation in the biotech area."
In earnings news, Xerox declined 1 1/4 to 86 1/8 after reporting third-quarter net of 88 cents a share, a penny above
most estimates.
Delta Air Lines Inc. said it earned $3.26 a share in its fiscal first quarter versus consensus expectations of $3.03. The
shares fell 1/8 to 106 5/8.
Southwest Airlines lost 7/8 to 35 despite beating most projections by two cents with its third-quarter results of 60 cents a
share.
Among widely-held computer-related issues, Dell Computer fell 3 to 96 1/8, Cisco Systems 2 to 82, Computer
Associates 2 3/8 to 78 3/8, Texas Instruments 5 to 120, Compaq Computer 2 to 71 7/8, Intel 1 5/8 to 82 3/8,
International Business Machines 2 3/8 to 102 3/4, and Microsoft 2 to 133 3/4.
Elsewhere in the technology complex, semiconductor manufacturing issues stumbled lower, not surprising given the
abnormal liquidation seen in recent sessions. Multipoint setbacks were recorded by SGS Thomson Microelectronics,
shedding 5 1/4 to 76 3/8; Kyocera Corp., 4 7/8 to 122 1/2; Quality Semiconductor, 4 11/16 to 8 7/16; Micrel Inc., 4
3/8 to 39 3/4; Jabil Circuit Inc., 3 to 50 3/4; ASE Test Ltd., 2 3/4 to 65; and Photronics Inc., 2 3/4 to 44 7/8.
Gold-mining stocks benefitted from the chaos in global markets. Yet the gains were unimpressive. Newmont Mining
Corp. improved 7/8 to 44 7/8, Ashanti Goldfield Co. 1/2 to 11 5/8, Getchell Gold Corp. 1/2 to 41, Placer Dome Inc.
7/16 to 19 1/4, Golden Star Resource Ltd. 3/8 to 6 3/4, and Barrick Gold Corp. 1/4 to 23 7/8.
U.S. BONDS:
Treasury bonds surged on a flight-to-quality rally Thursday as global market participants sought a friendly haven in the
midst of widespread turmoil in financial markets.
A plunging Hong Kong currency was the catalyst that sparked liquidation of stocks worldwide, with Hong Kong's Hang
Seng index cratering over 10 percent as a result.
The Federal Reserve issued a brief statement saying it is "monitoring developments" in global markets. Some believe the
Fed will be less inclined to ratchet short-term interest rates higher amid the turmoil.
On the economic front, the Labor Department said initial claims for state unemployment insurance benefits increased
8,000 to 315,000 in the week ended Oct. 18. The figure compared with most forecasts of 305,000 claims.
At 10:30 a.m. ET, with federal funds at 5.50 percent, the Federal Reserve added funds to the banking system through
overnight system repurchase agreements.
The 30-year Treasury advanced 1 2/32, to yield 6.340 percent from Wednesday's 6.407 percent. The 10-year note
rose 20/32, to yield 6.042 percent. The short bill's discount rate fell 1 basis point to 4.99 percent.
In the mortgage-backed market, 30-year currents advanced 6/32.
COMMODITIES:
New York light sweet crude for December delivery advanced $0.01 to $21.43.
December gold rose $0.50 to $324.10.
CURRENCIES:
The dollar traded mixed versus the yen and d-mark.
Dollar/yen was quoted at 121.60 from Wednesday's 120.91.
Dollar/mark was at 1.7721 from 1.7860. |
