U.S. Plunge Pounds World Markets
NEW YORK (AP) _ U.S. blue-chip stocks started to claw back today from Tuesday’s slide, although technology stocks remained under pressure as investors cashed in on last year’s record-shattering gains amid worries about the profitability of Internet companies.
European markets were down in late trading, but had recovered from their lows of the day. Asian markets, which ended their trading before American markets opened, suffered substantial losses.
The Dow Jones industrial average, which plummeted almost 360 points Tuesday, was up 102.07 at 11,100.00 at late morning. But the technology-heavy Nasdaq composite index, which plunged a record 264 points Tuesday, was off an additional 70.51 points, or by 1.8 percent, at 3,831.18.
Among unsettling factors for technology shares was news that Amazon.com’s losses were not narrowing, despite a jump in Christmas sales of books and music.
Interest rate jitters still gripped markets and investors appeared to take little comfort in a decision today by the European Central Bank to hold interest rates steady. There are widespread expectations that rates will rise in the United States and overseas in the coming months, squeezing corporate profits, cooling the economy and taking a toll on stock prices.
Wim Duisenberg, president of the European Central Bank, skirted direct mention of boosting interest rates, but said inflation was rising, mainly due to increasing energy costs, and would peak early this year.
In the latest confirmation that the U.S. economy is growing with vigor, keeping inflation fears afloat, the Commerce Department said today that American factory orders for manufactured goods rose 1.2 percent in November, the first increase since August, as companies producing electronic products enjoyed a surge in demand.
In afternoon trading in Europe, major indexes were down 2.1 percent in London, 3.4 percent in Paris and 0.74 percent in Frankfurt, Germany.
In Asia, traders staged a huge selloff today led by a big slide in prices on the Hong Kong market.
Fears of higher interest rates gripped exchanges virtually everywhere _ and once-hot technology shares cooled off fast.
Jim Wood-Smith, head of research at British brokerage Greig Middleton and Co. Ltd., blamed the selloff on an overreaction to long-standing concerns that the Federal Reserve, the Bank of England and the European Central Bank might all raise lending rates soon.
``This is being used as the excuse rather than the reason for people to bank some of the fantastic profits they made on telecoms and Internet stocks last year,″ he said.
The European Central Bank left key interest rates unchanged at its regular board meeting today. While the decision was expected, most economists predict a rate increase by as early as March to guard against inflation.
High-tech shares may have lost some of their momentum, but Wood-Smith saw no signs of an impending collapse.
``These are the growth stocks of the 21st century, so although the bubble may deflate occasionally, it ain’t going to burst,″ he said.
Blue chips on Asia’s biggest market, the Tokyo Stock Exchange, bounced back from steep early losses but still finished with a 2.4 percent decline for the day.
The mood was mostly gloomy throughout the region, with investors bailing out of technology shares _ as they had on Tuesday in New York.
``Every sector had a clobbering here,″ said Eric Gale, senior dealer at the Ord Minnett Ltd. brokerage in Sydney, Australia, where blue chips finished down 2.3 percent.
Prices were hit hardest in Hong Kong, where the Hang Seng Index finished with a loss of 1,226.10 points, or 7.2 percent, at 15,846.72. That represented only a slight recovery from an early slide that pushed the Hang Seng down by 8.1 percent.
It was the second-worst point loss in history for Hong Kong, Asia’s No. 2 market. The biggest point drop was the 1,438.31-point plunge of Oct. 28, 1997, at the height of the Asian financial crises.
``Euphoria in Hong Kong is ending,″ said Frank Gong, economist and strategist with the Bank of America. The Hang Seng had rung out 1999 with a record close before setting yet another one Monday, the first day of trading in 2000.
In Seoul, the Korea Composite Stock Price Index closed with a drop of 6.9 percent and its worst point loss in history.
Blue chips finished down 5.5 percent in Singapore, another market that had been setting records. Indonesian shares fell 3.2 percent on the day.
Philippine blue chips closed with a loss of 3.6 percent, while New Zealand prices finished 2.4 percent lower. Thai stocks fell 6.5 percent on the day.
Taiwanese blue chips finished 1.1 percent higher after recovering from an early loss.