Dow in the dumps
Seagram, TW plunge; Street sez interest cut too small
Ironically, Viacom Inc. and CBS Corp. both bounced back after being battered Tuesday. Viacom ended up $1.25 to $58 while CBS rose $1 to $24.25.
Disappointment
Wall Streeters said the sell-off was largely driven by disappointment that the Federal Reserve's interest rate cut, announced Tuesday afternoon, was smaller than expected. At the same time, investors are jittery about medium term business prospects for companies, in showbiz as much as any other sector.
"People are looking much more at the fundamentals of the business than (occurred during) the majority of the bull market," said Lehman Bros. analyst Larry Petrella. He said money managers were now seeking to anticipate where companies' earnings would have problems.
That magnified focus on business performance explained the heavy sell-off in Viacom and CBS Tuesday, caused by changes to earnings estimates by some analysts, although most Wall Streeters said the sell-off was an extreme overreaction.
'Lunatics' take over
"The lunatics are in charge of the asylum," said Larry Haverty, an analyst with money managers State Street Research.
Similarly, Time Warner's $2.68 decline to $87.56 Wednesday was interpreted by some analysts as a sign that worries about Disney and Viacom are beginning to infect Time Warner even though analysts are not predicting any earnings shortfall for the media giant.
Seagram stock, on the other hand, is clearly affected by perceptions about its exposure to Asia. Seagram stock fell $1.56 to a 12-month low of $28.68 Wednesday.
Other stocks suffering Wednesday included News Corp., which fell 68 cents to $25.62, Walt Disney Co. (down 56 cents to $25.43) and Tele-Communications Inc. (down $1.56 to $39.12). Metro-Goldwyn-Mayer, which warned of a significant operating loss in the third quarter earlier this year, fell 25 cents to $14.75 Wednesday.
