Entertainment stocks foundered along with the rest of Wall Street Wednesday, with the Dow Jones Industrial Average down 72.27 points to 3,626.75 — a drop of 2% for the day and 8.8% since the Dow’s record closing high of 3,978.36 on Jan. 31.
It was the fifth straight day of drops and the biggest one-day drop in over two months. Of the 98 showbiz stocks Daily Variety tracks, 71 were down, 17 were flat and only 10 were up.
Since the end of January, when the Dow Jones Industrial was near the 4,000 mark, most entertainment stocks have been off slightly.
With interest rates on the rise and the Clinton administration in an apparent holding pattern because of the Whitewater investigation, the market is not expected to show any immediate turnaround.
“We have definitely entered a new period for the market,” said Bob Walberg, market analyst at MMS Intl. “We have turned the corner and are now in a bear market.” In the last week alone, the index lost 253 points.
The trend took hold after the Federal Reserve last week raised interest rates for the second time in two months. The fear is the rising cost of credit will choke off recovery and curtail profits.
Also hurting the market was news that several investment firms, including Smith Barney Shearson and Lehman Bros., upped their cash levels to reduce their stocks Wednesday.
“Investors are translating that negative talking into negative action and doing some selling,” said Marshall Acuff, portfolio strategist at Smith Barney Shearson.
Cable stocks, already way down because of the Federal Communications Commission’s decision to cut cable rates by 7%, could drop further over the next week as the industry figures out what the commission’s just-released 200-page rulemaking will do to the bottom line (see story, page 3).
Declining cable stocks included Tele-Communications Inc., which closed at $ 20.88, off 63 cents. TCI stock has fallen by $ 7 in two months.
Turner Broadcasting’s A and B issues were also down $ 1 and $ 1.13 to $ 21 and $ 20.88, respectively. Variety this week reported that Ted Turner is interested in acquiring the Home Shopping Network.
Viacom B stock also was down 63 cents to $ 27.13. Despite denials, rumors persist that it is considering selling off its cable holdings to TCI, with whom the company has had undisclosed talks over the last few weeks.
On the broadcast side, CBS was down $ 2.25 to $ 310.63 while CapCities/ABC fell $ 5.88 to $ 692.25. NBC parent GE was also down $ 3.50 to $ 98.75.
On the studio side, MCA parent Matsushita was up 75 cents to $ 167.50. Par was down 75 cents to $ 44.13 and Fox parent News Corp. also dropped 25 cents to $ 51.13. Columbia and TriStar parent Sony Corp. dropped $ 1.25 to $ 57.50, and Walt Disney Co. slipped $ .88 to $ 42.25. Warner Bros. parent Time Warner slid $ 1.25 to $ 38.38