All, Streetcom article about todays selloff:
Stocks finished significantly lower Tuesday after a late-day
futures-driven selloff. After staging a partial recovery from
morning losses triggered by profit-taking and Korea's
deepening distress, all the major indices dropped again
during the last half hour.
Futures on the S&P 500 dropped below a key support level
after a big seller stepped in, and stocks themselves followed
suit, traders said.
With brokerages so thinly staffed, some cautioned against reading too much into what they said was a tough market,
holding out hope that Santa Claus will deliver that rally after
all. But others saw clear indications of an impending
economic slowdown in the pattern that emerged, in which
tech stocks and money-center banks softened and utilities
and drug stocks rose.
The Dow Jones Industrial Average finished down 127.54
at 7691.77. The tech-flush Nasdaq Composite Index
slipped 22.15 to 1509.91. The broad S&P 500 dropped
14.58 to 939.12. Even the small-cap Russell 2000 closed
down for the day, falling 0.85 to 422.03, after spending much
of the day in positive territory.
After Korea's stock market posted its biggest one-day
percentage drop ever on Tuesday, a day after Japan's
Nikkei fell to its lowest level in more than two years, some
were surprised that the market held up as well as it did. The
ADRs of Korean companies were sharply lower in early
trading, but they didn't have much company.
"The market's a little punchy," said Douglas Myers, vice
president of Interstate/Johnson Lane. "It's easy to buy
stocks, but the stocks I've had to sell I've had to work hard
to get them done."
Tipping the balance in favor of the buyers, many investors
are looking to reduce their exposure to equities, Myers said.
On the other hand, a flight out of foreign securities and into
relatively safe U.S. equities continues to support the
market. "The question is, will it be enough?"
First Albany's chief investment officer, Hugh Johnson,
doesn't think so. In his view, the pattern shows a developing
consensus that "things are going to slow and slow sharply
in '98."
The yield curve is flatter than ever in the last two days,
signifying an expectation of slower growth, he pointed out.
The benchmark 30-year U.S. Treasury bond ended the day
up 7/32 at 103 18/32, its yield slipping to 5.87%.
But also, investors appear to be fleeing the sectors that will
get hit hardest when growth slows, and migrating to safer
havens. While most blue-chips slipped in the last half hour,
for most of the day tech stocks and money-center banks
weakened, while drugs, utilities, health-care products,
alcohol and household products stocks gained. "That
reflects concern about the economy and earnings as we
move into 1998," Johnson said. "People don't turn out thelights and they don't stop taking drugs when the economy
slows."
Inexplicably, gold stocks also found buyers today.
Bottom-fishing may have accounted for some of the action,
Johnson said. But angst probably accounted for more.
"When there's uncertainty and volatility, many investors buy
gold and gold stocks." |
