Stocks in worst fall since Oct. 27 Dow drops 357.36 points to close at 8,165.99 amid fears over foreign markets

August 28, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks suffered their biggest loss since the Oct. 27 market rout yesterday as debt defaults and weakening currency sent markets around the world tumbling, raising the prospect of a slump in corporate earnings. Eight stocks declined on the New York Stock Exchange for every one that rose.

The Dow Jones industrial average plunged 357.36, or 4.2 percent, to 8,165.99, its lowest level in almost seven months and almost the lowest of the day. J. P. Morgan & Co. led the 30-stock average lower. The Standard & Poor's 500 index dropped 41.68, or 3.8 percent, to 1042.51. The Nasdaq composite index dived 81.72, or 4.6 percent, to 1686.41.

Investors are concerned that countries worldwide will weaken their currencies to make their exports more competitive, analysts said. The resulting deflation in import prices and lower demand overseas may cut U.S. corporate sales and profits, they said.

Volume on the New York Stock Exchange totaled 934.6 million shares, the second-highest level ever.

The Russell 2000 lost 14.32, or 3.8 percent, to 366.10. The New York Stock Exchange Composite index lost 20.74, or 3.8 percent, to 518.82, and the American Stock Exchange Composite index dropped 24.84, or 3.9 percent, to 608.99. The Wilshire 5000 index, the broadest market measure, fell 390.99, or 3.9 percent, to 9557.07.

Expectations that Russia's woes will spread sent equity markets reeling worldwide. Japan's Nikkei 225 index plunged 3.0 percent to its lowest close in six years yesterday. The Bloomberg 500 European index fell 3.8 percent, Germany's DAX Xetra index lost 4.5 percent, Canada's TSE 300 lost 6.0 percent and Brazil's Bovespa lost 10 percent.

Indicators watched by technical analysts show stocks have fallen below their recent trading ranges, a sign that the decline could have further to go.

Bank stocks fell on the prospect of widening losses in emerging markets, after Russia announced a debt-restructuring plan that will force steep losses on investors. J. P. Morgan dropped $13.1875 to $104.75. Citicorp plummeted $11.875 to $122, and is down 32 percent from its July 20 high. Estimates of what owners of Russian debt will receive range from 5 cents to 30 cents on the dollar.

Bankers Trust Corp., which analyst David Berry at Keefe Bruyette & Woods says had about $1 billion in exposure to Russia, fell $8.3125 to $83.8125. Republic New York Corp. fell $4.625 to $45.50, after saying it will take a $110 million charge for losses on Russian bonds, "substantially" eliminating third-quarter earnings.

On all U.S. exchanges, 2,378 stocks reached 52-week lows, while 36 rose to new highs. Only 25 of the stocks in the S&P 500 rose.

The Dow average's year-to-date gain -- 18 percent on July 17 -- is now 3.3 percent. Four months ago, before exchanges made it tougher to halt trading, a 350-point drop would have triggered a 30-minute stop in U.S. stock trading. Now, the Dow would have to drop 900 points before trading is halted.

U.S. bonds rose for a third day, sending yields to record lows, as investors sought refuge in the world's biggest bond market. The benchmark 30-year Treasury yield fell to 5.34 percent, the lowest since the U.S. started regular sales of the securities in 1977.

None of the S&P 500's 89 industry groups gained, although some utility shares advanced. PacifiCorp rose $1.125 to $23.125 and Peco Energy Co. rose 25 cents to $33.125. Power producers are big borrowers, so they benefit from falling interest rates. Their relatively fat dividends also are more attractive when interest rates fall.

Coca-Cola Co., the third-biggest stock in the S&P 500 by market value, fell $4.4375 to $74.75.

Other consumer-products companies declined along with Coke. Bestfoods, maker of "Skippy" peanut butter, fell 43.75 cents to $51.50, Procter & Gamble Co. fell $2.3125 to $80.5625 and Colgate- Palmolive Co. lost $4.75 to $80.875.

Among the day's gainers, MainStreet Financial Corp. rose $7.875 to $33.375 after the bank holding company agreed to be acquired by BB&T Corp. for $516.4 million, or $36.21 a share, in stock.

Pub Date: 8/28/98

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