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Wall Street ends day under water

U.S. markets plunge, pushed lower by increasing jitters about Russia, Japan, and presidential scandal at home.

4 min read
Wall Street stocks plunged today, pushed lower by increasing fears that an end to the economic crisis in Russia and Japan is nowhere in sight, and increasing jitters over growing political turmoil related to President Clinton's weakening power.

The Dow Jones Industrial Average continued heading south, closing down 249.48 points, or 3.17 percent, at 7,615.54. At one point today, the Dow lost as much as 315.4 points. The Nasdaq also fell, shedding 38.97 points, or 2.4 percent, to 1,585.58.

Today's drop comes on the heels of yesterday's loss of 155.76 points, and Tuesday's single-day record gain of 380.53. While it is difficult to predict when the wild ride will end, most analyst agree that the market is now testing bottom.

"It's part of the market's normal activity, to retrace and test the lows it hit when it lost 500 points," said Norma Yaeger, president of Yaeger Capital Markets. "I think the bad news is out there already and I think [the market] is going to level out before coming back up."

Indeed, a plethora of news has been disturbing the markets of late.

Special prosecutor Kenneth Starr yesterday sent Congress a report that is said to contain evidence that could lead to President Clinton's impeachment, roiling the U.S. and global markets.

"It is the first release of any hard evidence by Starr," said Elaine Yager, vice president and senior technical analyst at the investment banking firm Herzog Heine Geduld. "Democrats can talk about this [political turmoil] ending, but it is really just at the beginning.

"There is so much more here on the table than meets the eye," Yager added.

Starr's investigation also is about campaign contributions, Yager noted, although that point has been obscured by the saturation coverage of the Clinton-Lewinsky affair.

"Will [this investigation] implicate [Vice President] Al Gore?" she asked. "It is the uncertainty that causes the problem here."

Overseas economic turmoil also pushed stocks lower. In Russia, President Boris Yeltsin bowed to parliamentary pressure and pulled his nomination of Viktor Chernomyrdin for prime minister. Yeltsin nominated Foreign Minister Yevgeny Primakov instead, hoping Primakov could stop the growing disintegration of the Russian economy.

In Japan, the central bank moved to lower key interest rates to 0.25 percent from about half a percent, in hopes that such a move would lift Japan out of its worst recession since World War II. But with Japanese interest rates already incredibly low, the move is unlikely to have an impact on helping the nation's ailing economy.

"Lowering the interest rates a quarter percent is not going to help Japan," said Yaeger. "[The Japanese government] has to do something much more dramatic.

"They have to implement a major tax break to get more money into people's pockets so they go out and spend it and help stimulate the economy," Yaeger added. "Japan is unwilling to do that. People are holding on to their money because they are concerned."

The continuing Asian financial crisis pushed overseas markets lower today, with both Japan's Nikkei and Hong Kong's Hang Seng falling over half a percent. The Nikkei closed down 89.51 points to 14,666.03, and the Hang Seng closed down 55.49 points to 7,849.96.

The market's roller-coaster ride continued today with a particular battering for most technology and Internet stocks.

Some Net stocks managed to turn around after falling earlier in the day. Web portals, which were down most the day even posted gains. Excite gained 8.39 percent, Lycos posted a 6.25 percent rise, but Yahoo managed to rally to post a small loss of 0.16 percent. Browser software maker and Web portal Netscape Communications posted a 3.14 percent drop.

CMP Media posted a modest gain of 2.1 percent, and Sun Microsystems also closed higher at 47.375, up 1.5 or 3.27 percent, after saying it believed its bookings would be in line with estimates.

Online book and music retailer Amazon.com lost 5.77 percent, Preview Travel dropped a whopping 12.5 percent, and America Online was down 1.06 percent.

Shares in 3Com rose 1.9375 to 27.3125, while Ascend Communications stock gained 0.6875 to 42.6875 on rumors that the companies were possible takeover targets by Intel.

"The moves in the Internet sector are generally amplified relative to the movement in the stock market," said Phil Leigh, an analyst at Raymond James. "The moves were amplified on the market's upside and downside."

Internet stocks are particularly susceptible to the market's volatility because their valuation is pegged to their anticipated long-term performance, according to Leigh.

"When the market is optimistic, it is willing to be more amenable to accepting optimistic forecasts," he said. On the flip-side, when the market get pessimistic, they do not accept rosy forecasts as readily. "The impact is that stocks whose value is dependent on future financial performances tend to get price declines that are greater in magnitude than the overall stock market."

PC makers also saw losses, with Hewlett-Packard dropped 7.12 percent. Compaq Computer and Gateway 2000 fell 2.59 percent and 2.06 percent, respectively. Apple Computer recorded a modest gain of 2.01 percent.

People are now throwing in the towel, but I don't think they should," said Yaeger. "I am considering this a purchase opportunity, as the market hits the low levels it had reached a week ago."