It's looking bad out there.
More bad news from Japan and an ugly selloff in Germany this morning greet Wall Street, where nerves are already a bit raw from yesterday's pullback. At 9 a.m., the
futures were off 19, indicating a lower open. With the flight to quality continuing, the yield on the 30-year Treasury bond kept making new lows. The long bond was up 29/32 to 109 4/32, dropping the yield to 4.91%.
After dealing with the opening drop, investors will turn their attention to two events. First, at 10 a.m.,
New York Fed
will testify before the
House Banking Committee
on the risks hedge funds pose to the financial system. Then, at 1 p.m.,
will address the
Conference on the Americas
The testimony of Greenspan and McDonough isn't expected to count for much -- the two will likely emphasize that the mess at
Long Term Capital Management
was an aberration -- but Rubin's speech is getting top billing.
International Monetary Fund
Group of Seven
industrial nations' meetings starting tomorrow in Washington, Rubin is expected to outline U.S. views on modifying the IMF and
and how to alter what policymakers have lately been calling the "world financial architecture."
"We might get a little bounce on Mr. Greenspan's and Mr. Rubin's comments, but we've got a difficult time ahead of us," said Bill Meehan, market analyst at
. Meehan believes, however, that the market may be near the bottom. "Much as economists told us that that there was a recession just as the recession was ending, there's a good chance that strategists will be telling us we're in a bear market just as it's ending." Meehan expects to see some truly capitulative selling, and he emphasizes that there may have to be some sort of change in Japan -- perhaps the dissolution of the
government -- before stocks can work their way up the other side of the trough.
"The key is going to be what happens in Japan, and Greenspan and Rubin don't have any medicine for that," he said.
It may not have come as a surprise, but a poor
-- the quarterly measure of business sentiment -- confirmed the sorry state of the Japanese economy. The tankan gave the poorest reading on large manufacturers in over four years and slipped to a historic low among small manufacturers. Small manufacturers said lending attitudes have become stricter. It is perhaps a good time to stop talking about the threat of a credit crunch in Japan, and acknowledge that it has come. This is especially worrisome since Japanese companies traditionally rely on credit, rather than equity issuance, for funding.
The selling in stocks accelerated toward the end of the day, when investors realized that public pension funds would not step in to prop up the market. The
fell 209.27, or 1.6%, to a 12-year low of 13,197.12, with banks leading the way.
It's been a very bad day in Germany. No one really expected the
to cut rates, and the German central bank did not disappoint. That accelerated the selling in Frankfurt. As in Japan, banks were taking some of the heaviest hits, and
was off 5.3%. The
was off 315, or 7.1%, to 4180.36.
In Paris, the
was off 134.62, or 4.2%, to 3063.33.
Stocks were also down in London, of course. The
was down 132.2, or 2.6%, to 4932.20. Now everybody's waiting for the U.S. open.
"We've had some minor rallies over here, mainly associated with the S&P futures, but nothing really convincing," said one London trader. "It's been more of the same, really."
So is there a bright spot out there? For Hong Kong traders, perhaps. Their market was closed for National Day.
Thursday's Wake-Up Watchlist
- AT&T (T) - Get Report is in talks to buy
IBM's (IBM) - Get ReportGlobal Network unit. The unit has been valued at around $4 billion,
The Wall Street Journal reported.
CellStar (CLST) reported third-quarter earnings of 4 cents a share, beating
First Call's five-analyst consensus estimate of 3 cents a share but falling far short of the year-ago 26 cents.
Marriott (MAR) - Get Report reported third-quarter earnings of 32 cents a share, beating the year-ago 27 cents but short of the 33-cent First Call consensus.
Eli Lilly (LLY) - Get Report and
ICOS (ICOS) agreed to form a joint venture to develop and sell pills to treat sexual dysfunction in men and women.
Lesco (LSCO) warned third-quarter and 1998 earnings won't meet estimates. The company said third-quarter earnings will fall 50% short of last year's 51 cents a share, while earnings for 1998 will fall 30% short of the year-ago $1.02 a share. First Call's two-analyst consensus estimate projected third-quarter earnings of 61 cents per share and full year earnings of $1.20.
Arrow Electronics (ARW) - Get Report will buy
Bell Industries' (BI) electronics distribution group for about $185 million in cash. Bell also warned it expects operating income for the third quarter to come in about 60% below year-ago figures.
Retailers could take another hit after
Morgan Stanley Dean Witter downgraded (to name just a few)
Sears (S) - Get Report,
Barnes & Noble (BKS) - Get Report and
Kmart (KM) to outperform from strong buy.
Ashland (ASH) - Get Report said severance and environmental-related charges will cut fourth-quarter earnings by 74 cents a share, and warned fourth-quarter operating earnings will fall short of analysts' estimates. First Call's 12-analyst consensus estimate projects earnings of $1.08 a share.
Hartford Life (HLI) - Get Report to buy from attractive,
Merrill Lynch downgraded
Central & South West (CSR) to near-term neutral from near-term accumulate. The firm kept its long-term rating of accumulate on the stock.
IHOP (IHOP) September same-store sales fell 0.2% from a year ago.
Gannett (GCI) - Get Report expanded its share buyback program by $500 million. The company said a substantial portion of the $250 million cleared for repurchase under a Sept. 1 plan has already been used.
Lincoln National's (LNC) - Get Report new chief executive is in New York today, hoping to convince Wall Street that "one of the biggest underachievers in the life-insurance business is trying to move up in class," according to today's Heard on the Street column in the
Journal. The CEO, Jon Boscia, plans to brief investors and analysts on a broad restructuring plan to improve the company's return on equity from about 11% to at least 15% by the end of 2000, the