Market Update: Gore? Bush? Insecurity Breeds Market Freakout
The stock market has recovered some from the sickening nosedive that followed a news conference with Al Gore's campaign officials, Defense Secretary
Bill Daley
and former Secretary of State
Warren Christopher
early this afternoon. Both men are challenging the veracity of votes counted in a number of counties in Florida, where a painstaking recount is currently taking place. Concern that this election battle is likely to proceed for a number of days has killed the stock market in the last hour.
After Tuesday's election, George W. Bush led Al Gore in Florida by approximately 1,700 votes, a margin so close that Florida law mandates an automatic recount. With 70% of the recount finished, Bush's lead has shrunk to a mere 800 votes. Regardless of the outcome of the legal wrangling, a significant number of overseas ballots need to be accounted for within the next 10 days.
Gore's campaign officials gravely noted media reports of poorly designed ballots in Palm Beach County, Fla., which seemed to tip an inordinate number of votes in the Democrat-dominated county to Pat Buchanan. Officials also said they would request a hand recount in four counties in Florida. The Dow was down nearly 300 points immediately following the news conference, though it had lately recovered somewhat. The
Nasdaq Composite Index also plummeted, racking up triple-digit losses, though it had lately bounced back a fair amount as well.
"They used a lot of strong language, which may lengthen this. And uncertainty is not the best environment for stock prices," said Steven Goldman, market strategist at
Weeden
. "It's gonna come down to the legal system, which will expedite the process."
The travails on the
New York Stock Exchange are widespread, but the stocks that have reacted most sharply are the financial stocks, which have fallen dramatically since the beginning of the press conference. Lately the
American Stock Exchange Broker/Dealer Index
was down 1.6%, while the
Philadelphia Stock Exchange/KBW Bank Index
, which was up for most of the day, fell into negative territory, dropping 0.3%.
"This makes for a difficult environment and that perception is a concern for stock prices. But still this is a concern for traders and not long-term investors," said Goldman. "Investors should not be panicking."
Aside from election-related issues, the Dow's weakness much of the morning was related to
Disney
(DIS) - Get Report
, which reported lower-than-expected earnings and suffered analyst downgrades. The stock was lately down 14.6%.
Other sectors were not immune. Technology stocks were sinking as well, with big-cap technology stocks particularly weak.
Sun Microsystems
(SUNW) - Get Report
was down 2.8%.
Dell
(DELL) - Get Report
was down 8.3%
prior to its post-close earnings announcement, knocking the
Philadelphia Stock Exchange Computer Box Maker Index
off 4.7%.
Internet stocks are also tanking.
America Online
(AOL)
was down 6.9% after the announcement that the
Federal Trade Commission's
decision on a potential AOL-
Time Warner
(TWX)
merger, expected today, is likely to be delayed due to issues involving access to Time Warner's cable lines.
Yahoo!
(YHOO)
is off 9.9%, despite comments from President Jeffrey Mallett defending the Internet.
Sector Watch
Major technology indices are sinking on the news today. The
Philadelphia Stock Exchange Semiconductor Index
dropped 1.4%; the
Nasdaq Telecommunications Index
was lately down 2.6%, and the
Morgan Stanley High Tech 35
dropped 2.3%.
The
S&P Retail Index
has increased its losses in the last hour, but those stocks were having a poor day anyway.
Best Buy
(BBY) - Get Report
warned of slowing profits, killing the stock, which is down 38.3%. The retail index was lately down 4.3%.
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Bonds/Economy
Bonds opened firmer on equity weakness due to the presidential impasse, and have risen since in reaction to the stock market's decline.
The benchmark 10-year
Treasury note is at 99 20/32, up 14/32, to yield 5.797%.
The 30-year
Treasury bond is at 105 26/32, up 19/32, to yield 5.835%.
The
Producer Price Index
(
definition |
chart |
) for October rose 0.4% after an 0.9% rise in September, An increase of 0.1% had been expected.
The core rate---which cuts out food and energy costs--- fell by 0.1% after a rise of 0.3% in the prior month. Overall the index is seen as benign despite the tick-up in the headline rate.
initial jobless claims
(
definition |
chart |
source
) for the week ended November 4 rose sharply to 344,000 from 309,000 last week, well above expectation. The claims number is the highest since January 9, 1999 and the 4-week average for initial claims has now moved up to 317,250 from 303,250 on October 14.
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