Stock markets around the world took a tumble Thursday after US Federal Reserve Board Chairman Alan Greenspan scotched speculation that central bankers are uniting for coordinated interest-rate cuts. Rumors of such a move had been one of the precious few positive elements bolstering share prices.
The Wired Index fell 11.88 points to close at 371.84. The Dow Jones Industrial Average ended 216.01 lower at 7873.77, putting a halt to four straight sessions of gains.
On Wednesday, the Fed chief rattled Wall Street by avoiding mention of interest rates while reading prepared remarks to the House Banking Committee. Share prices immediately dropped, only to rebound before the closing bell.
Afterward, though, Greenspan was asked if it was true that leading industrialized nations were teaming up to fuel economic growth. His answer: "I can safely say that at the moment there is no endeavor to coordinate interest-rate cuts."
Clunk.
Financial markets in Asia, Europe, and Latin America went into a tailspin as investors realized that help isn't on the horizon. Japan's Nikkei average dropped 2.4 percent Thursday to its lowest level since March 1986, and trading in Brazil was halted for 30 minutes after the Bovespa index plunged 10 percent.
Note, however, that Greenspan qualified his comment by saying "at the moment." Some market watchers interpret this as a sign that some sort of unified effort still may be in the works.
George Koo, associate director of Burnham Securities, said he believes US Treasury Secretary Robert Rubin has been trying to broker a rate-cut deal with other nations, although the response so far has been lukewarm.
"Everyone right now is looking only at their own economies," Koo said. "All the central banks are trying to determine what to do next."
He still expects a limited form of cooperation to take shape -- not quite a global full-court press, but a modest form of damage control.
"The Europeans are probably more likely to go for it than the Asians," Koo predicted.
In the meantime, telecom stocks received a pounding after France Telecom said its first-half profit fell by 14 percent, and French equipment-maker Alcatel warned that its profit this year will miss analysts' expectations by at least US$260 million. The announcement drove down Alcatel's share price by almost 40 percent.
Finnish rival Nokia (NOK/A) shed $4.31 to $77, and Lucent Technologies (LU) dropped $3.88 to $72.50. MCI WorldCom (WCOM) slid 50 cents to $46.56.
Qwest Communications (QWST) couldn't resist the downturn after announcing a strategic partnership with Netscape. Under the three-year pact, Netscape's Netcenter portal will offer a variety of long-distance and messaging packages, while Qwest will serve as a primary high-speed conduit to the site. Qwest fell 44 cents to $32.50.
Yahoo (YHOO) fell $3.38 to $90 even as senior company execs said they expect the company's operating margin -- profit as a percentage of revenue -- to be as high as 36 percent within 12 months. Yahoo had an operating margin of 22 percent in the second quarter.
Semiconductor shares were nailed as Motorola announced it will halt construction of a $3 billion chip plant in Virginia until the industry's sales improve. Intel (INTC) shed $1.63 to $83.44, and Applied Materials (AMAT) dropped 6 cents to $24.
Elsewhere in tech, Dell Computer (DELL) shed $1.88 to $58.19, and Cisco Systems (CSCO) declined $2.81 to $61.81. Microsoft (MSFT) declined $2.94 to $105.25 after losing a bid to have certain damaging allegations excluded from its antitrust case. The company's trial begins on 15 October.
The Nasdaq dropped 43.67 points to 1646.24, and the S&P 500 slid 26.62 to 1018.86.
