After dropping 357 points Aug. 27, the Dow Jones Industrial Average seesawed all day Aug. 28 before ending the day down another 114 points, closing at 8,051.68. The turmoil came as investors reacted to the devaluation of the Russian ruble, instability in Latin America and continued fallout from the Asian economic crisis.
Hard hit were the stocks of agency holding companies based in the U.K., including WPP Group and Saatchi & Saatchi. The London Stock Exchange closed down 2.2% Aug. 28.
WPP's American Depository Shares dropped 5% during Aug. 28's trading in the Nasdaq exchange, closing at $55.25, down $2.88. Saatchi closed down 25 cents at $8.50. Cordiant Communications Group, which dipped Aug. 27, closed up 12 cents the following day at $9.25, a 1.37% gain.
WON'T AFFECT BUSINESS
WPP Group Chief Executive Martin Sorrell dismissed the downturn as "a sensible correction" which would not affect the course of business.
The largest blow was absorbed by Snyder Communications, the Bethesda, Md.-based company that acquired Arnold Communications earlier this year; its stock dropped $4.44 or 12.37% Aug. 28 to close at $31.44. Snyder had already lost $4.63 on Aug. 27.
True North Communications, Chicago, also dropped sharply Aug. 28 to close down 4.9%, at $25.38, a $1.31 drop.
True North has had a history of erratic earnings performance, which investors may be reacting to, said Jim Dougherty, an analyst with Prudential Securities. He said the British companies' drops were due to weakness in the U.K. market.
But True North CEO Bruce Mason said the correction is actually a good way to release some pressure from an overheated U.S. market.
"Rather than ripping along at 100 mph and then falling off a cliff, this takes a bit of the heat off," he said. He said True North recently reported a strong second quarter and expects to meet analysts' expectations in the current quarter.
Philip H. Geier Jr., chairman-CEO of Interpublic Group of Cos., also downplayed the drop, saying "there's too much emotionalism" in the market. The Russian market is too small to affect the economies of Europe for any prolonged period, he said, predicting the markets will bounce back and strong, well-balanced companies will see their stock rebound.
Interpublic closed Aug. 28 at $60, down $1.62, or 2.64%.
"We will see a surge," Mr. Geier said. "Not quickly, but we will see it."