Paper: The Atlanta Journal and The Atlanta Constitution

Banking fears continue after Monday's slide

Date: December 19, 1989

Wall Street today was hoping for a rebound from Monday's 42-point lashing.

Anxiety over the volume of bad real estate loans on the books of commercial banks and other financial institutions had sent stock prices tumbling sharply across the board Monday. And that concern carried over into today's early trading.

Stock prices remained mostly lower in heavy trading by early afternoon, but blue-chip issues turned higher as the oil and technology sectors showed strength. The Dow Jones average of 30 industrials, down 56.10 points in the past two sessions, was up 1 point by early afternoon.

Today's trading followed Monday's deep decline when the index of 30 blue-chip industrial stocks, down as much as 50 points, closed 42.02 points lower at 2,697.53, continuing the slide of just over 14 points recorded last Friday.

Investors were especially uneasy after the Bank of New England announced last Friday it was raising its reserves for real estate loan losses to more than $1 billion and would report a substantial loss for the year. The Bank of New England was the most actively traded stock on the Big Board Monday, falling $1.50 per share to $7.50 as 3.5 million shares changed hands. The stock fell $3.37 1/2 Friday.

Big Board trading Monday was fairly brisk at 184.79 million shares, down from last Friday's "triple witching hour" trading of 240.39 million shares. Losers overwhelmingly outnumbered gainers 1,290 to 360, with 362 unchanged.

Wall Street has increasingly turned its attention to bank stocks in recent weeks, worried mainly about the softening real estate market and problem real estate loans in bank portfolios.

A number of analysts have said that some of the biggest banks in the nation - Manufacturers Hanover Corp., Chemical Bank and even Chase Manhattan Corp. - may be too weakened by these and other problems to survive as independent institutions.

Prices of bank stocks of interest in the Southeast followed the downward trend Monday, with Sovran Financial Corp. of Richmond, merger partner with Atlanta's Citizens and Southern Corp., down $1.37 1/2 to $34 and NCNB Corp. of Charlotte down $1.25 to $42.87 1/2. C&S fell 75 cents to $26.87 1/2; SunTrust, 87 1/2 cents to $21.62 1/2, and First Wachovia, 25 cents to $38.75.

Monday's overall market slide was not limited to Big Board issues. Over-the-counter stocks took their worst tumble since the mini-crash of Oct. 13, again with financial stocks bearing the brunt of the selling. Losses in insurance stocks added to falling share prices among banks and thrifts.

The NASDAQ composite OTC index plummeted 7.81 points Monday, the second largest single-day loss this year. The NASDAQ insurance index fell 22.17 points after some of the largest OTC insurance stocks suffered bruising losses when First Boston Co. and others made negative comments about the re-insurance industry.

Traders cited concern that real estate losses are eroding the value of many asset portfolios held by insurance companies, which are among the major investors in commercial real estate.

Nevertheless, weakness in bank and financial stocks was not necessarily a sig n the entire market is about to plunge, some analysts said.

"We are looking for this [market] to stabilize and start to do better after the first of the year," said Fred Meissner, associate technical analyst for Robinson-Humphrey Company Inc. in Atlanta.

"Long term, we still think the market is healthy, but when the market drops below 2,700, discipline says you have to become cautious," he said. "We still feel the basic year-end rally objectives are intact."

Interest rates on bonds advanced Monday, with short-term Treasury securities reaching their highest level in three weeks.

Three-month T-bills averaged 7.62 percent, up from 7.60 percent last week and the highest since 7.63 percent on Nov. 27, while six-month T-bills averaged 7.43 percent, up from 7.41 percent last week, the highest since 7.45 percent on Nov. 27.

The average yield for one-year Treasury bills, the most popular index for making changes in adjustable-rate mortgages, was 7.73 percent last week, unchanged from the previous week.

Caption:

The last two paragraphs did not appear in the final edition. chart: The Dow Stumbles / John Amoss / Staff