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Dow Plunges 31 as Selling Wave Sweeps Market : Index Closes Below 2,500 for First Time Since July

September 22, 1987|From Times Wire Services

NEW YORK — A late wave of selling swept the Dow Jones industrial average below the 2,500 mark Monday for the first time since late July, as the recent correction gained momentum in a broad decline led by specialty retailers and drug companies.

The Dow Jones average of 30 blue chips, which lost 84.10 points last week, fell another 31.82 to 2,492.82, its lowest close since it stood at 2,485.33 July 24.

"It was just a lot of selling, and at times the market looked like it was on the verge of panic in particular issues," said Eugene Peroni, head of technical analysis at Janney Montgomery Scott Inc., noting the weakness of retail stocks.

Volume on the New York Stock Exchange came to 170.07 million shares, against 188.07 million in the previous session.

The session began amid widespread talk that the market was ready for a rally after a pullback of some 7% in the Dow Jones industrials since the average reached a record closing high of 2,722.42 Aug. 25.

The Dow did, in fact, rise more than 20 points at the outset. But the bond market, strong in early trading, gave up its gains and headed lower as the session passed, and enthusiasm for stocks gave way to selling once the advance in bond prices faded.

"After the failure of the bond market and then the stock market to get a sustained rally under way, a lot of demoralization set in," said Hugh Johnson, an analyst at First Albany Corp.

Though worries about inflation, Federal Reserve policy and other economic matters persist, Johnson said, "stock prices themselves have taken over as the focus of concern."

Analysts also noted that some popular individual stocks have lately taken a drubbing.

Retailers, led by the Gap, were the weakest group, partly because they have been big gainers in the bull market, and were hit by profit taking.

Also, concern about weak sales prompted a flurry of reduced earnings estimates from Wall Street analysts in the past two sessions, causing the stocks to lower, traders said.

The Gap, which tumbled 10 to 37, led the active list with turnover of more than 3.6 million shares. Over the weekend the company said it expected to report lower earnings for the quarter that ends Oct. 31.

Shares of the Limited, another specialty apparel retailer, lost 1 to 34 3/4.

The Treasury's bellwether 30-year bond lost 1/2 point, or $5 per $1,000 face value, the same amount it had gained by midday. Its yield, which moves inversely to its price, rose to 9.60% from 9.56% late Friday.

The federal funds rate, the interest on overnight loans between banks, traded at 7.44%, up from 7.13% Friday.

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