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Dow Falls 72 Points Amid Market Fears : Stocks: The seventh drop in eight days puts average far below that of two weeks ago. Investors are worried by interest rates and political turmoil, analysts say.


Stock prices tumbled Wednesday in the biggest one-day selloff in eight weeks, raising new fears that Wall Street's bull market has ended and that more sharp declines are ahead.

The Dow Jones industrial average plunged 72.27 points to 3,626.75, its seventh decline in eight days, bringing its loss since March 18 to nearly 300 points.

In a dramatic reversal of the optimism that drove stocks to record highs in January, analysts say investors have become deeply troubled by rising interest rates, the White House's spreading political problems and a growing number of foreign crises.

Moreover, the stock market's long upward march since October, 1990--when the Dow bottomed at 2,365--has been so unblemished by significant declines that the severity of this one has taken professional and novice investors by surprise.

"We're in a highly volatile and vulnerable environment," warned Alan Ackerman, investment strategist at brokerage Reich & Co. in New York. The cascading selling of recent days, he said, reflects investors' mounting fears that "he who hesitates is lost" in a plummeting market.

Shares of Orange County's public companies, however, have generally fared better than the overall market, analysts said, because many local companies have long been undervalued by the market and have therefore escaped the brunt of the national selloff.

And with a large concentration of high-technology and medical companies in the county, the increasingly bearish market will probably take longer to arrive.

"A few companies are taking a hit along with everyone else," said Chris Johndrow, a stockbroker at Cruttenden & Co. Inc. in Irvine. "But for the most part, they are doing OK. This is a hotbed of technology. They don't usually fall out of favor as much as most stocks."

Nevertheless, among the top 100 public companies in Orange County, four of the five shares that lost 9% or more in value Wednesday were high-tech issues. Enhanced Imaging Technology Inc., a maker of specialized films and filters for the medical industry, was the greatest percentage loser. Its stock dropped 10.34% in value to close at $6.50 a share on the Nasdaq market.

In all, 60 of Orange County's top 100 stocks lost ground Wednesday, 16 were up and 24 were unchanged.

Trading volume surged to nearly 400 million shares on the New York Stock Exchange on Wednesday, and 20 stocks fell in price for every four that rose, a lopsided count rarely seen except in bear markets and in crisis-induced panics.

In the bond market, where surging interest rates have been the stock market's chief worry this year, long-term Treasury bond yields reached 7.1%, up from 6.35% at year-end and the highest level since February, 1993.

For the average investor, financial markets' stunning selloffs over the past two months have been difficult to reconcile with the extraordinarily good economic news. For the first time since the late 1980s, the economy appears to be in a sustained recovery. Companies are hiring again and corporate earnings are rising at a healthy pace.

Despite the economy's improving tone, however, there have been relatively few signs of higher inflation--the troubling upward push in prices of goods and services that has historically accompanied strong recoveries.

In an attempt to keep the economy's growth moderate and inflation at bay, the Federal Reserve Board has twice raised short-term interest rates by a quarter-point this year, once on Feb. 4 and again on March 23.

Although Wall Street pros had believed that most investors were prepared for the Fed rate hikes, the central bank's moves now are being widely blamed for frightening investors and sparking the stock and bond markets' accelerating declines. The Fed's Feb. 4 rate increase triggered a 96-point drop in the Dow that day.

Many analysts say the problem is simply that investors had grown used to declining interest rates over the past three years and that the reversal of that long slide has had a worse-than-expected psychological effect on investors.

"The watershed was that the Fed put its stamp of approval on the fact that interest rates were going up again," said Alfred Kugel, investment strategist at Stein Roe & Farnham in Chicago.

Other analysts, however, say the markets are responding not so much to the small rise in short-term interest rates as to the growing uncertainty about the Clinton Administration's Whitewater affair and to a sudden burst of turmoil overseas: the assassination of Mexico's probable future president, North Korea's intransigence over the nuclear issue and the U.S.-Japan trade conflict.

When the world economy's prospects look promising and political issues are few, investors are willing to pay relatively high prices for stocks, experts note. But as uncertainty about the future increases, investors naturally lower the prices they are willing to pay for stocks--and may begin trimming what they own.

"I believe the markets are just factoring in some political risk again, around the world," Reich & Co.'s Ackerman said.

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