T-Bill Remarks Spur Stock Plunge

Off-the-cuff remarks by the Japanese prime minister following a speech at Columbia University helped give momentum to a large sell-off in the stock market Monday.

The Dow Jones industrial average suffered its worst point drop since the crash of 1987, falling about 192 points to 7,604. The blue-chip barometer had closed at a record-high 7,796.51 on Friday.

Asked why the weakness of the dollar against the yen over the past several years has not motivated Japan to sell billions of dollars of U.S. government-issued securities it holds, Prime Minister Ryutaro Hashimoto said, “On several occasions we’ve had pressure to sell off.”

“We were tempted to sell off. … It is true we have not really made the advantageous choice,” he said, adding that Japan could have sold its U.S. treasury bonds and increased its gold holdings.

“I believe the U.S. economy has the strength to absorb” such a selloff, he said, “but the effects could be enormous. … It is because … countries are holding onto the T-bills that the U.S. economy is being maintained.”

Hashimoto concluded by saying, “I hope the United States may engage in efforts to maintain exchange stability.”

The remarks, which did not sound overly serious and were made through an interpreter, apparently were viewed as a threat by jittery investors, who have pushed the Dow into record territory in a historic bull market.

Traders said Hashimoto’s remarks weakened the bond market, which added momentum to a crush of profit-taking spurred by rising interest rates. The remarks also helped weaken the dollar slightly.

While large in point terms, the Dow’s drop Monday was less significant when viewed as a percentage of its overall value - the average slid only about 2.5 percent. In the Oct 19, 1987 crash, by contrast, the index lost more than 22 percent.

Hashimoto was in New York following the Denver Summit of Eight. He spoke in Japanese to more than 250 people at a luncheon organized by the the Foreign Policy Association and Columbia’s School of International and Public Affairs.

Addressing U.S. and Japanese economic reports which last week showed the U.S. trade deficit with Japan on the rise after shrinking for much of last year, Hashimoto said he believes the gap will narrow in the long run.

Some of the stocks that moved substantially or traded heavily Monday:

NYSE

Tandem Computers, up 5-3/4 at 20-3/4.

Compaq Computer, down 2-7/8 at 103-7/8.

Houston-based Compaq, the world’s leading personal computer maker, agreed to acquire Tandem for about $3 billion in stock. The combined company would be the world’s leading supplier of servers, the powerful systems that run networks of personal computers. Compaq is to exchange 0.21 share of its stock for each share of Tandem, which is based in Cupertino, Calif.

Pennzoil, up 17-3/4 at 77-3/8.

Union Pacific Resources Group made an unsolicited $4.2 billion bid for the rival energy concern. Pennzoil said its board would study the offer. Union Pacific, based in Fort Worth, Texas, said it is offering $84 a share in cash for about half of Pennzoil’s stock. If that cash offer is successful, Union Pacific would pay $84 a share in stock for the remainder.

NASDAQ

CACI International, down 3-7/8 at 15-3/8.

The company warned late Friday that it expects to report disappointing results for its fourth quarter ended June 30. CACI said it was hurt by reduced profits from its British unit and costs related to marketing its Year 2000 service.

American National Bancorp, up 3-3/16 at 19-5/16. Crestar Financial agreed to acquire American National for $20.25 a share, or about $73 million, in cash and stock. American National is a savings and loan company with 10 branches in the Baltimore area. Crestar has 477 branches in Maryland, Washington D.C., and Virginia.

AMEX

Paxson Communications, up 1/2 at 12-7/8.

Looking to raise money for TV acquisitions, Paxson agreed to sell its 46 radio stations to Clear Channel Communications of San Antonio for $693 million. Paxson is based in West Palm Beach, Fla.