NEW YORK (DBC) -- U.S. stocks collapsed Monday, with the Dow Jones Industrial Average staggering to its largest
point-loss ever as panic-stricken investors, weary of last week's hefty declines in global markets, dumped shares with
abandon.
The Dow Jones Industrial Average was shaken for a 554.26-point loss, or 7.2 percent, to 7161.15, its lowest level since May
8. In percentage terms, the Dow was down more than in any session since the 22.6 percent freefall of Oct. 19, 1987. At the
close, the barometer stood 13.3 percent below its Aug. 6 record close of 8259.31, marking its first 10 percent correction
since the bull market began in October 1990.
Trading on the New York Stock Exchange was halted at 2:35 p.m. ET after the Dow Jones Industrial Average was socked
with a 350-point decline, triggering a 30-minute mandated closure, the first in history. Upon the resumption of trading at 3:05
p.m. ET, prices renewed their plunge, only to see activity cease again at 3:30 p.m. ET for the remainder of the session, with the
average down 550 points.
According to preliminary figures, Big Board volume, at 694.66 million shares, was the heaviest in history.
"My guess would be that we open down Tuesday morning since I'm not sure we've gotten the selling out of the way," said
Frank Gretz, market analyst at Shields & Co. "What you want to see is some kind of capitulation. I think the trading halts
made things worse. When you stopped the trading, you had a lot of people wanting to get out of their positions by the end of
the day, and it made things worse."
"This is a correction, not a bear market," said A.C. Moore, chief investment strategist at Principal Financial Securities.
Noted market bull Abby Joseph Cohen of Goldman Sachs told her sales force that she remained sanguine regarding the
market's outlook, and observed that the day's action constituted a market event, not an economic event.
The action came in the wake of another turbulent day in global markets. Overseas, Hong Kong's Hang Seng index of blue-chip
stocks plummeted 5.8 percent. Thursday, the average crashed 14 percent only to rebound 7 percent in Friday's activity. For
full story.
In Europe, London's FTSE 100 index lost 2.6 percent, France's CAC 40 index tumbled 2.8 percent, and Germany's DAX
index withered 4.2 percent.
The global market turmoil of recent days is expected to slow economic growth in Southeast Asia, a key market for many U.S.
corporations. As such, shares of firms with extensive exposure to Asian markets were saddled with the steepest losses.
The worst-performing group on the day, health maintenance organization shares, tumbled 14 percent after Oxford Health
Plans warned of slowing earnings growth.
The Standard & Poor's 500 Index fell 6.9 percent, the New York Stock Exchange Composite sank 6.6 percent, and the
American Stock Exchange Composite lost 5.8 percent.
New York Stock Exchange declining issues obliterated advancers by an astounding 19 to 1.
The Nasdaq Composite fell 7.0 percent. Losers demolished winners by an incredible 11 to 1 in the Nasdaq Stock Market.
Volume totaled 910 million shares.
Within the list, relative strength was experienced by the utility, real estate investment trust, insurance brokerage, machine tools,
and life insurance groups.
In special situations, Oxford Health Plans Inc. crashed 42 7/8, or 62 percent, to 25 7/8 after the health maintenance
organization said higher medical costs and less-than-anticipated revenues will result in a third-quarter loss of between 83 cents
and 88 cents a share. Analysts had expected a profit of 47 cents. In addition, the company said that 1998 earnings will likely
be reduced by 60 cents to 80 cents a share. For full story.
Merck slipped 8 3/8 to 85 after Smith Barney trimmed its rating to "neutral" from "outperform." The stock has lagged the
market since February.
Citicorp tumbled 13 1/4 to 123 3/8. Asia Pacific business makes up about 25 percent of the banking heavyweight's total
profits.
In earnings news, U.S. West Group posted third-quarter operating net of 70 cents a share, a nickel ahead of most views.
The stock lost 1 1/4 to 38 5/8.
Oil & gas field services provider Baker Hughes fell 4 1/8 to 41 3/4. The company reported fiscal fourth-quarter operating
results of 51 cents a share, beating Street forecasts by three cents.
The day's big losers were health maintenance organizations issues, lower in sympathy with Oxford Health. United Healthcare
Corp. surrendered 8 1/2 to 43 1/8, Pacificare Health System 5 1/4 to 62 1/2, Sierra Health Services Inc. 3 7/8 to 35,
Foundation Health System 2 1/4 to 29 3/4, Humana Inc. 1 11/16 to 20 15/16, and Coventry Corp. 2 3/8 to 13 5/8.
Benchmark computer-related issues posted some of the day's biggest setbacks. Digital Equipment sank 5 3/8 to 45 1/4
after finalizing an agreement to settle its patent dispute with Intel. As part of the settlement, DEC will sell its chipmaking
operations to Intel for about $700 million. Intel stock shed 5 1/4 to 74 3/4.
Also, Dell Computer declined 9 1/8 to 84 7/8, Cisco Systems 7 3/8 to 72 7/8, Computer Associates 9 1/8 to 69 1/4,
Compaq Computer 8 1/4 to 60 1/2, Microsoft 6 1/2 to 128 7/8, International Business Machines 8 to 90, Motorola 4 3/4 to
59, 3Com 3 to 42 7/8, Oracle 3 to 31, Bay Networks 3 5/8 to 28, and Hewlett-Packard 4 3/8 to 59 1/2.
Elsewhere in technology, the semiconductor segment, hit Friday by a UBS Securities downgrade and Intel's postponement
of the opening of a chip fabrication plant, limped lower Monday. Among chipmakers, Texas Instruments fell 9 1/8 to 102 3/4,
ASE Test Ltd. 12 to 51, Sanmina Corp. 9 3/4 to 64 5/8, Semtech Corp. 5 7/8 to 49 3/4, DII Group Inc. 4 15/16 to 22 5/8,
Dallas Semiconductor 6 1/8 to 45 1/2, and Photronics Inc. 6 3/8 to 35 1/8.
In the semiconductor equipment group, Uniphase Corp. slid 15 3/8 to 57, ASM Lithography Holding 11 1/2 to 69 7/8,
Orbotech Ltd. 9 3/4 to 39 3/4, CFM Technologies Inc. 5 to 18, Veeco Instruments Inc. 7 3/8 to 38 1/2, and Photronics Inc.
6 3/8 to 35 1/8, Helix Technology Corp. 6 to 42 1/4, and KLA Tencor Corp. 5 7/8 to 46 1/2.
Leading growth stocks were shelled. A number of the issues had weakened over the past few weeks. Yahoo! Inc. sank 9
5/8 to 38, Lycos Inc. 6 15/16 to 21 3/8, APEX PC Solutions 7 1/16 to 23 5/8, Iridium 7 3/8 to 39, Veritas Software 4 1/8 to
38 1/2, Smart Modular Technology 10 1/8 to 41, Orbotech Ltd. 9 3/4 to 39 3/4, and Siebel Systems 5 7/8 to 40.
Meanwhile, the drug group, which held up relatively well during last week's downdraft, finally caved in Monday, with
Warner-Lambert down 10 1/2 to 140 1/2, Schering Plough 6 5/8 to 52 1/8, Eli Lilly 6 3/4 to 62 1/2, SmithKline Beecham 5
3/4 to 41 5/8, Pfizer 4 1/2 to 67 1/4, Bristol-Myers Squibb 5 3/8 to 81 5/8, and Abbott Labs 3 1/4 to 58 1/4.
U.S. BONDS:
Treasury bonds posted big gains Monday, benefiting from another flight-to-quality rally amid faltering global financial markets.
Prices were slightly higher for most of the session, but attracted a strong bid in the final hour as New York Stock Exchange
trading was halted twice due to the enormous selloff in share prices.
With nothing significant on the day's economic calendar, traders sat glued to their screens for the latest quotes of U.S. share
prices.
The market's next hurdle is Tuesday's release of the third-quarter employment cost index, an important gauge of labor costs.
At 10:30 a.m. ET, with federal funds at 5 9/16 percent, the Federal Reserve added reserves to the banking system through
overnight system repurchase agreements.
In late-New York trading, the 30-year Treasury advanced 1 16/32, to yield 6.162 percent from Friday's 6.236 percent. The
10-year note rose 1 4/32, to yield 5.832 percent. The short bill's discount rate was 7 basis points lower at 4.91 percent.
In the mortgage-backed market, 30-year currents advanced 9/32.
COMMODITIES:
New York light sweet crude for December delivery advanced $0.10 to $21.07.
December gold rose $3.70 to $312.30.
CURRENCIES:
In late-New York action, the dollar traded lower versus the yen and d-mark.
Dollar/yen was quoted at 121.63 from Friday's 122.07.
Dollar/mark was at 1.7510 from 1.7740.
LOOKING FORWARD:
Tuesday, the third-quarter employment cost index will be released at 8:30 a.m. ET. Most economists look for a 0.8 percent
rise on a quarterly basis, and a 2.9 percent rise on an annual basis. The index is a key gauge of labor costs in the U.S.
economy and measures growth in wages, salaries, and employer benefit costs. Since labor comprises two-thirds of the cost of
producing goods, any barometer of wage growth is scrutinized carefully by the Federal Reserve and Wall Street for clues as to
increases in retail price inflation.
At 10:00 a.m. ET, the October consumer confidence report will be released. The Street expects a reading of 127.8. It is
unclear whether consumer confidence leads to stronger consumer spending or whether spending improves consumers'
confidence levels. Thus, the usefulness of this release for economic forecasting purposes is questionable.
Earnings reports are anticipated from Fore Systems, Humana Inc., and UAL Corp. |
