NEWS OF THE WEEK
WALL STREET PLUNGE: Chemical stocks tumble too There was no special dispensation for chemical stocks during the stock market's historic decline on Sept. 11. When the Dow Jones Industrial Average dropped 86.61 points, Standard & Poor's 500 index dropped 11.88 points, and Standard & Poor's 400 industrial index dropped 13.34 points—all plunges of nearly 5%— that day, C&EN's index of chemical stocks plummeted 21 points, also nearly 5%. On Sept. 12, the major indexes all dropped another 2%. C&EN's chemical stock index fared only slightly better, moving down a little more than 1%. Last week, the stock market remained nervous but less volatile. C&EN's chemical stock index, after declining marginally on both Monday and Tuesday—making five consecutive trading days in which the index decreased—recovered with a 1% increase on Wednesday, Sept. 17. Still, even assuming a measure of stability has been re-established in the market, the index remained 5% below its level on Labor Day and 7% below its September high, notched on the fourth. C&EN's chemical stock index, weighted according to market value (stock price times number of shares of common stock outstanding), is based on the stock market performance of seven firms: American Cyanamid, Celanese, Dow Chemical, W. R. Grace, Hercules, Monsanto, and Union Carbide. The chemical stock index's 6% decline between Sept. 10—just before the bottom d r o p p e d out of the market—and the middle of last week is the same as that for Dow Chemical, the market value of which accounts for a third of the index total. Dow shares, at $543/4 on Sept. 17, on the other hand, fell only 3% between Labor Day and the 17th. Bigger losers during the Labor Day-toSept. 17 period were shares of Cy4
September 22, 1986 C&EN
anamid, down 13% from $86!/4 on Labor Day to $75%; Celanese, down 8% from $226 on Labor Day to $209; Grace, down 9% from $50% on Labor Day to $46; and Monsanto, down 4% from $71% on Labor Day to $68V2. Hercules shares lost 4% of their value from $56V2 on Labor Day, declining to $54%. Union Carbide shares were the most stable; these fell 3% from $22% on Sept. 1, closing out the 17th at $217/g. Between Sept. 10—the eve of the market plunge—and the 17th, share prices fell 9% at Cyanamid; 6% at Celanese; 8% at Grace; 9% at Monsanto; 5% at Hercules; and just 1% at Union Carbide. The stock market's broad decline affected biotechnology stocks more drastically. Biotechnology issues already had lost much of the vigor that boosted C&EN's biotechnology stock index 209% between the end of June 1985 and the end of June this year. The index peaked at 353 on June 13 and had fallen 18% in steps to 288 a week before the big
Chemical stocks down 7% from recent hiqh Chemical stock index,3 1954 = 100
September 1986 a Based on weighted stock prices for American Cyanamid, Celanese, Dow Chemical, W. R. Grace Hercules, Monsanto, and Union Carbide.
tumble. When the market began to break, investors deserted many hightechnology issues first. The share price for Genentech, for example, plummeted 27% that week. As a result, the overall C&EN biotechnology stock index, based on stock prices for 18 companies, fell 23% in one week to 222. Some firms were further hurt by negative individual developments. During the height of the panic, for instance, Hoffmann-La Roche sued Genentech, charging the biotech leader's human growth hormone product, Protropin, infringed on a patent acquired by Roche in the 1970s. Monoclonal Antibodies revealed that Ortho Pharmaceutical, its chief customer, was withdrawing supplies of ovulation prediction kits purchased from the firm because of shelf-life problems (C&EN, Sept. 15, page 10). And, in a tragedy, Ribi ImmunoChem Research founder Edgar Ribi died in a plane crash (C&EN, Sept. 8, page 15). By the middle of last week, most prices had stopped falling. C&EN's b i o t e c h n o l o g y stock index had recouped a third of the previous week's loss, rising 10% to 244. Nevertheless, that left the index still 31% below its mid-June level. Nor were Wall Street analysts sure that there was not room for more decline. A major question now is whether the stock market declines of Sept. 11-12 were the result of a few, particular circumstances or whether they represent the beginning of the stock market correction that many analysts have been predicting. Specifically, the market reacted to negative news about interest rates, inflation forecasts, and other issues, setting off a downward trend that was compounded by computerizedprogram directed trading by large investors. D
