Of all the days of infamy recorded on Wall Street, an unlucky Friday, Oct. 13, 1989, turns out to have been the catalyst for extraordinary, long-term damage to Washington area stocks. Looking back across the 16 months that have passed since then, it is clear that the events of that day shattered investor confidence to a far deeper extent than anyone could have imagined.
A mini-crash in the stock market on Oct. 13, 1989 was triggered by reports that a buyout deal for UAL Corp., parent of United Air Lines Inc., had come apart. The news broke late in the day but it drove the Dow industrials down 190 points in 90 minutes.
By itself, the loss in the Dow was not that damaging and, indeed, on the following Monday, the Dow regained 88 points.
But something deeper had happened. For one thing, the mini-crash took place two years after the huge crash of Oct. 19, 1987 -- when the Dow dropped 508 points.
The mini-crash came at a time when investors were just beginning to regain their confidence in the stock market, believing that those teeth-rattling events wouldn't happen again.
The trauma of the mini-crash, however, was quickly seen at retail brokerage firms, where customers scurried for cover. The collective anger of the brokers swept up through the executive suites of major New York brokerage firms and ricocheted back into the halls of Congress -- setting off a wave of demands for market reforms.
It is interesting to note that Congress -- 16 months later -- is still wrestling with those reform demands and is still trying to reduce the chances for wild market swings.
One other effect of the mini-crash was to widen the performance gap between the "blue-chip" stocks such as General Electric Co. and General Motors Corp. and the stocks of thousands of smaller companies.
Investors who believe they can prosper by investing in smaller, so-called secondary stocks, have been waiting since 1984 for those companies to return to favor by consistently showing better gains than the blue-chips.
The January rally did give secondary stocks a 10 percent to 14 percent boost -- compared to a 4 percent gain for the blue chips -- but there is no sign that the long wait for small stocks to come back is over yet.
Indeed, many of the secondary stocks that are listed in the Washington Business Selected Area Stock Index (seen below) still show the weakness created by the confidence-blasting effect of the October 1989 mini-crash.
For it was on that day 16 months ago that Washington stocks started on a long downhill slide that only recently bottomed out.
From its starting point on Oct. 13, 1989, the slide continued for five months, until April 1990. The stocks then began to recover slightly during the summer. But the August events in the Persian Gulf sent the stocks spiraling down again.
The Washington Business stock index finally hit bottom last Oct. 29, at an average price of $12.81. That was down from its peak of $21.11 just before the mini-crash.
Between the October bottom and the end of 1990, the index moved back up to $14 and during January it climbed again, rising to $15.33. Last week, it closed at $16.17. But it is still a long way from $21.11.
Needless to say, one of the key reasons that the Washington Business index is so depressed is that financial stocks were hit very hard last year. Indeed, the stock of three institutions became worthless.
Thus, it is the nonfinancial stocks that have been showing most of the gains recorded during January -- the month when stocks traditionally rebound.
This year, the rebound seems to have more to do with hopes for a quick end to the Persian Gulf fighting than with seasonal factors -- such as tax-selling -- that depress the markets in December and set the stage for a January rebound.
But a rebound is a rebound, welcomed by investors whatever the reason.
Here, briefly, is a sampling of some of the stronger stocks that have rebounded in January. They fall into several categories.
One group includes companies that are getting front-burner attention from investors because they are involved in military and defense work affected by the war. They include:
Radiation Systems Inc. of Sterling, Va., which makes antennas and satellite dishes used by the military. During January, the shares moved up to $15.50 from $10.63, a gain of 46 percent.
General Kinetics Inc. of Rockville, which makes equipment for Navy ships and facsimile machines that are secure against electronic eavesdropping, machines that are much in demand these days. The firm's stock climbed to $16.75, up from $10.75, for a 56 percent increase.
Allied Research Corp. of Severna Park makes ammunition and weapons systems. Its stock rose to $4.88 in January, up from $3.25, for a gain of 50 percent.
Martin Marietta Corp. of Bethesda, the area's largest defense contractor, makes a major segment of the Patriot missile system, which has been deployed in the Persian Gulf. Martin Marietta stock, virtually flat in 1990, perked up with the start of hostilities, rising to $50.63 from $44, up 15 percent.
Several technology and biotechnology stocks also gained:
Penril DataComm Networks Inc., of Gaithersburg, continued its turnaround in the communications business. Penril stock, which gained 65 percent last year, picked up another 24 percent in January, rising to $10.88 from $8.75.
Legent Corp., of Vienna makes software for IBM mainframe computers. Its stock barely moved in 1990 and closed the year at $26.50. In January, after turning in a strong profit report for fiscal 1990, the stock moved up to $36, for a gain of 36 percent.
Life Technologies Inc. of Rockville is a biotech firm that saw its stock gain 36 percent in 1990 as demand for its products grew. That trend continued in January as the company's shares moved up to $22.25, from $18.63, a gain of 20 percent.
Two major Washington area stocks showed these January results:
Marriott Corp., of Bethesda saw its shares fall 69 percent during 1990 as the hotel and restaurant company felt the effects of the slowdown in commercial real estate. In January, the stock moved back to $13, up from $10.50, a 24 percent gain. The rally came on news that Marriott would report its first quarterly loss in 28 years because of discontinued projects but had obtained $400 million in new credit lines.
The Washington Post Co. stock dropped last year to $198 from $281.50, a loss of 30 percent. In January, the shares moved back up to $222, up 12 percent. The company, which publishes The Washington Post and Newsweek, saw its profits trimmed by a decline in newspaper advertising.
Gainers in the health industry included:
PHP Healthcare Corp. of Alexandria. The firm provides medical care to federal, state and local agencies, with emphasis on work for the Department of Defense, which has been turning over health care to private organizations. PHP stock, which showed a 115 percent gain in 1990, moved up to $20.75 in January, a gain of 24.8 percent.
Among retail stores and food distributors, the gainers were:
Smithfield Foods Inc. of Smithfield, Va., whose stock continued to build on its 61 percent rise of last year. A major supplier of meat products, Smithfield shares moved up in January to $26.63 from $19.75, gaining almost 35 percent.
Circuit City Stores Inc. of Richmond operates a chain of stores selling television sets and other electronic products. A long-time winner, the stock dropped 41 percent to $12.75 last year. In January. it bounced back to $14.75, up 16 percent.
In the real estate field were these stocks:
Interstate General Co. L.P. of St. Charles, Md., whose shares lost 60 percent last year, falling to $2.88 from $7.25, because of adverse economic conditions. In January, however, the rebound brought the stock back to $4, a gain of 39 percent.
Rouse Co. of Columbia, Md., a real estate management firm, also was hurt by industry troubles, dropping to $14.75, from $26.50 last year, a 44 percent drop. In January, the stock moved back to $17.25, a gain of 17 percent.