-
Notifications
You must be signed in to change notification settings - Fork 0
/
assign1-test2-wsj0014.txt
132 lines (99 loc) · 10.4 KB
/
assign1-test2-wsj0014.txt
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
<TEXT>
For the moment, at least, euphoria has replaced anxiety on Wall Street.
The Dow Jones Industrial Average jumped sharply yesterday to close at 2657.38, panic didn't sweep the world's markets, and investors large and small seemed to accept Friday's dizzying 190-point plunge as a sharp correction, not a calamity.
Many went bargain-hunting.
Among those sighing with relief was John H. Gutfreund, chairman of Salomon Brothers, who took to the firm's trading floor to monitor yesterday's events.
As the rally gained strength at 3:15 p.m., he smiled broadly, brandished his unlit cigar and slapped Stanley Shopkorn, his top stock trader, on the back.
At first, it seemed as if history might repeat itself.
As trading opened yesterday morning on the Big Board, stocks of many of the nation's biggest companies couldn't open for trading because a wave of sell orders was overwhelming buyers.
By 10:10, the Dow Industrials were off 63.52 points, and the stock of UAL Corp., whose troubles had kicked off Friday's plunge, still hadn't opened.
But then, as quickly as the Dow had fallen, it began to turn around.
It ended with a gain of 88.12 points.
By the market's close, volume on the New York exchange totaled more than 416 million, the fourth highest on record.
The Big Board handled the huge volume without any obvious strain, in sharp contrast to Black Monday of 1987.
But the rally was largely confined to the blue-chip stocks, which had been hard hit during Friday's selling frenzy.
Overall, more Big Board stocks lost money than gained.
And many arbitragers, already reeling from Friday's collapse of the UAL deal, were further hurt yesterday when a proposed takeover of AMR Corp., the parent of American Airlines, collapsed.
Indeed, the Dow Jones Transportation Average plunged 102.06 points, its second-worst drop in history.
World-wide, trading was generally manageable.
The Frankfurt stock exchange was hardest hit of the major markets, with blue chips there falling 12.8%.
In London, a midday rally left the market's major index off 3.2%, and Tokyo's leading stock index fell only 1.8% in surprisingly lackluster trading.
Other, more thinly traded Asian markets were hit harder than Tokyo's, but there were no free-fall declines.
Investors big and small say they learned valuable lessons since the 1987 crash: In this age of computerized trading, huge corrections or runups in a few hours' time must be expected.
What's more, such short-term cataclysms are survivable and are no cause for panic selling.
Stephen Boesel, a major money manager for T. Rowe Price in Baltimore, says, "There was less panic than in 1987: We had been through it once."
In Somerset, Wis., Adrian Sween, who owns a supplier of nursing-home equipment and isn't active in the stock market, agrees.
"I look at it as a ho-hum matter," he says.
Many other factors played a part in yesterday's comeback.
The Federal Reserve signaled its willingness to provide liquidity; the interest rate on its loans to major banks inched downward early in the day.
Foreign stock markets, which kicked off Black Monday with a huge selling spree, began the day off by relatively modest amounts.
The dollar, after falling sharply in overnight trading to 139.10 yen, bounced back strongly to 141.8, thus easing fears that foreigners would unload U.S. stocks.
And the widely disseminated opinion among most market experts that a crash wasn't in store also helped calm investors.
Many major institutions, for example, came into work yesterday ready to buy some of the blue chips they felt had been sharply undervalued on Friday.
Still, amid all the backslapping and signs of relief over yesterday's events, some market professionals cautioned that there is nothing present in the current market system to prevent another dizzying drop such as Friday's.
"There is too much complacency," says money manager Barry Schrager.
Computers have increasingly connected securities markets world-wide, so that a buying or selling wave in one market is often passed around the globe.
So investors everywhere nervously eyed yesterday's opening in Tokyo, where the Nikkei average of 225 blue-chip stocks got off to a rocky start.
The average plunged some 600 points, or 1.7%, in the first 20 minutes of trading.
But the selling wave had no conviction, and the market first surged upward by 200 points, then drifted lower, closing down 647.
Unlike two years ago, most of Japan's major investors chose to sit this calamity out.
In Merrill Lynch & Co.'s Tokyo trading room, some 40 traders and assistants sat quietly, with few orders to process.
Clients "are all staying out" of the market, one Merrill trader says.
The relative calm in Tokyo proved little comfort to markets opening up in Europe.
Frankfurt's opening was delayed a half hour because of a crush of sell orders.
"The beginning was chaotic," says Nigel Longley, a broker for Commerzbank AG.
In London, the view from the trading floor of an American securities firm, Jefferies & Co., also was troubling.
A computer screen displaying 100 blue-chip stocks colors each one red when its price is falling.
The screen was a sea of red.
"I see concern, but I don't see panic," says J. Francis Palamara, a New Yorker who runs the 15-trader office.
London's blue-chip stock index turned up just before 8 a.m. New York time, sending an encouraging message to Wall Street.
When trading opened in New York at 9:30 a.m. EDT, stocks fell sharply -- as expected.
Futures markets in Chicago had opened at a level suggesting the Dow would fall by about 60 points.
With sell orders piled up from Friday, about half the stocks in the Dow couldn't open on time.
By 9:45, the industrial average had dropped 27 points.
By 10 a.m., it was down 49.
Ten minutes later, the Dow hit bottom-down 63.52 points, another 2.5%.
But shortly before then, some of Wall Street's sharpest traders say, they sensed a turn.
"The first thing that caught my eye that was encouraging was Treasury bonds were off," says Austin George, head of stock trading at T. Rowe Price.
"It meant that people weren't running pell-mell to the safety of bonds."
Shortly after 10 a.m., the Major Market Index, a Chicago Board of Trade futures contract of 20 stocks designed to mimic the DJIA, exploded upward.
Stock traders were buoyed -- because an upturn in the MMI had also started the recovery in stocks on the Tuesday following Black Monday.
"The MMI has gone better," shouted a trader in the London office of Shearson Lehman Hutton.
Shearson's London trading room went wild.
Traders shouted out as their Reuters, Quotron and Telerate screens posted an ever-narrowing loss on Wall Street.
Then, nine minutes later, Wall Street suddenly rebounded to a gain on the day.
"Rally, rally, rally," shouted Shearson's Andy Rosen.
"This is panic buying."
Major blue-chip stocks like Philip Morris, General Motors and Proctor & Gamble led the rally.
Japanese were said to be heavy buyers.
German and Dutch investors reportedly loaded up on Kellogg Co. Then, traders say, corporations with share buy-back programs kicked into high gear, triggering gains in, among other issues, Alcan Aluminium and McDonald's.
Walt Disney Co., which had one of the biggest sell-order imbalances on Friday and was one of seven stocks that halted trading and never reopened that day, opened yesterday late at 114.5, down 8.5.
But then it suddenly burst upward 7.5 as Goldman, Sachs & Co. stepped in and bought almost every share offer, traders said.
By 10:25, the Dow had turned up for the day, prompting cheers on trading desks and exchange floors.
Among Big Board specialists, the cry was "Pull your offers" -- meaning that specialists soon expected to get higher prices for their shares.
"It was bedlam on the upside," said one Big Board specialist.
"What we had was a real, old-fashioned rally."
This technical strength spurred buying from Wall Street's "black boxes," computer programs designed to trigger large stock purchases during bullish periods.
Typical, perhaps, was Batterymarch's Dean LeBaron.
Mr. LeBaron, who manages $10 billion, says, "We turned the trading system on, and it did whatever it was programmed to do."
Asked what stocks the computer bought, the money manager says, "I don't know."
Not everybody was making money.
The carnage on the Chicago Board Options Exchange, the nation's major options market, was heavy after the trading in S&P 100 stock-index options was halted Friday.
Many market makers in the S&P 100 index options contract had bullish positions Friday, and when the shutdown came they were frozen with huge losses.
Over the weekend, clearing firms told the Chicago market makers to get out of their positions at any cost Monday morning.
"They were absolutely killed, slaughtered," said one Chicago-based options trader.
Meanwhile, a test of the stock market's rally came at about 2 p.m., with the Dow at 2600, up 31 points on the day.
Charles Clough, a strategist at Merrill Lynch, says bargain hunting had explained the Dow's strength up to that point and that many market professionals were anticipating a drop in the Dow.
Moreover, the announcement that real estate magnate and sometime raider Donald Trump was withdrawing his offer for AMR Corp. might have been expected to rattle traders.
Instead, the rally only paused for about 25 minutes and then steamed forward as institutions resumed buying.
The market closed minutes after reaching its high for the day of 2657.38.
Across the country, many people took yesterday's events in stride, while remaining generally uneasy about the stock market in general.
Says James Norman, the mayor of Ava, Mo.: "I don't invest in stocks.
I much prefer money I can put my hands on."
While Mayor Norman found the market's performance Monday reassuring, he says, he remains uneasy.
"We have half the experts saying one thing and half the other" about the course of the economy.
Ralph Holzfaster, a farmer and farm-supply store operator in Ogallala, Neb., says of the last few days events, "If anything good comes out of this, it might be that it puts some of these LBOs on the skids."
Says Gordon Fines, a money manager at IDS Financial Services in Minneapolis, "You're on a roller coaster, and that may last.
The public is still cautious."
</TEXT>
</DOC>