Economic, Election Doubts Play Havoc With DowBy David A. Vise
The Washington Post
The stock market dropped precipitously Monday morning as uncertainty about the world's economies, the presidential election and the direction of interest rates provoked a wave of selling on Wall Street before bargain hunters helped the market regain nearly all of the lost ground in the afternoon.
At one point Monday morning, the Dow Jones industrial average had fallen nearly 105 points but the market turmoil ended with a semblance of order and the Dow closed at 3179.00, down 21.61 points. It was the Dow's lowest close since the first trading day of the year in January and followed a 53.76 point drop on Friday _ the steepest decline in six months.
Traders said they expect greater volatility and nervousness in the markets to persist until the election next month resolves some of the uncertainty over who will be in the White House and what direction economic policy making will take.
The market "is saying there is huge, huge fear of uncertainty," said Jimmy Cayne, president of Bear Stearns & Co. in New York. "I guess it is a combination of the economies all over the world plus the election."
Traders also blamed the drop in U.S. stock prices early Monday on weakness on the Tokyo Stock Exchange and London Stock Exchange, both of which posted significant declines in the face of sluggish economies, interest rate jitters and turmoil in currency trading. That altered the pattern during much of this year, when massive declines on foreign stock exchanges caused little reaction in U.S. markets.
"It is sort of a global phenomenon in that all the markets around the world are weak and we are not immune to that," said Newton Zinder, market analyst at Shearson Lehman Brothers Inc. in New York.
But traders said the uncertainty over who will win the election _ and what type of president the front-runner, Arkansas Gov. Bill Clinton, would make _ was now one of the primary forces shaping the mood of the U.S. market, making it more vulnerable to jolts from abroad and negative economic news domestically.
Clinton, on a bus trip in Florida, commented on the day's events by saying, "It is important not to overreact too much to one day's developments. One of the things that I would like to say to the markets is: `Relax, calm down, help is on the way.' "
"Wall Street likes the status quo, which is George Bush and gridlock. Nobody knows what Clinton would do," said Al Goldman, market analyst with A.G. Edwards & Sons Inc. in St. Louis. "Is he really a moderate? Will be he able to control the passions of spend-and-tax liberals? The reality is we don't know what will happen and that is the type of uncertainty nobody likes."
Brad Weekes, a trader at Donaldson, Lufkin & Jenrette Securities Corp., said the political season was contributing to other instabilities in the market, but he didn't lay blame on any particular candidate's prospects.
"I don't think it's who. It's just the fact of the election," he said. "Uncertainty breeds volatility."
Wall Street will be watching Washington closely today as the Federal Reserve's Open Market Committee meets to consider whether to cut interest rates further. Numerous market experts said that one reason for the stock market's volatility Monday and its drop on Friday was a fear that recent economic reports were weak enough to raise serious questions about the pace of the recovery, but not necessarily bad enough to cause the Fed to cut interest rates again.