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Dow Off 19 as Broad Market Continues to Slide

July 30, 1998|From Times Wire Services

NEW YORK — Stocks fell modestly Wednesday, steadying from the wild gyrations of recent days, but extending a sharp retreat from the record highs reached less than two weeks ago.

The Dow Jones industrial average fell 19.82 points to 8,914.96, the lowest finish in more than a month and 423 points below the closing record of 9,337.97 set July 17.

Meanwhile, bond yields rose ahead of the Treasury's quarterly auction. The dollar rose against the Japanese yen amid uncertainty over Japanese economic stimulus plans.

Grains, energy and metals prices all fell, dragging benchmark commodity price indexes to new five-year lows, despite gains in coffee, sugar and cotton prices.

In the broader stock market, declining issues outnumbered advancers by a 6-5 margin on the New York Stock Exchange in heavy trading.

The Nasdaq composite index was off 15.04 points at 1,881.49.

The Standard & Poor's 500 fell 5.03 points to 1,125.21, more than 5% from record terrain. The NYSE composite index fell 2.07 points to 567.42, and the Russell 2,000 index of smaller companies fell 1.35 points to 426.19.

Analysts attributed the declines to problems from Asia spreading to the rest of the world and prospects of weaker corporate earnings.

"Fewer and fewer companies look like they will have decent earnings going forward," said Paul Lesutis, managing director of Brandywine Asset Management.

The second-quarter earnings season is drawing to a close with most of the big companies having reported.

"The tone is uncertain, but the bias is still on the downside. I believe everybody is finally admitting that the Asia crisis is not going to be over by the third quarter," said Edgar Peters, chief investment strategist at PanAgora Asset Management.

"The broad market is already reflecting this, but the problem is that the large caps are distorting what the market is doing as a whole," he said.

Adding to the market's jitters were comments by a senior economist at the Federal Reserve Bank of St. Louis that stock-price-to-earnings ratios, which have surged late in an expansion despite little prospect of higher corporate profits, may spell greater risk than investors believe.

Investors are also bracing for two key pieces of economic data.

Today, the second-quarter employment cost index will be released. The most comprehensive measure of labor costs is closely watched by the Federal Reserve Board for signs of wage inflation from the tight job market. The ECI is forecast to rise 0.8%, according to a Reuters poll.

On Friday, the government will release the first estimate of second-quarter gross domestic product.

In the bond market, the price of the key 30-year U.S. Treasury bond fell, causing its yield, which moves in the opposite direction, to rise to 5.76% from 5.73% at Tuesday's close.

Among Wednesday's highlights:

* The Dow's biggest decliners were Wal-Mart Stores, down $2.56 to $60.88; Coca-Cola, down $1.50 to $81.88; and Union Carbide, down $1.38 to $48.69.

IBM rose $2.31 to $127.75 to cushion the Dow's fall. But among the leading Nasdaq technology issues, Dell Computer fell 88 cents to $107.38, Microsoft fell $1.56 to $110.69 and Intel fell $1 to $84.63.

* Drug stocks fell for the fifth time in seven days after rallying all year. Pfizer lost $2.50 to $109.13, Merck dropped $1 to $123.31 and Schering-Plough fell $2.56 to $94.50.

* The Dow Jones transportation average sank 2%. Delta Air Lines fell $4.75 to $125.25 and is down 12% in two weeks.

In currency trading, the dollar rose to 142.35 yen Wednesday from 141.35 Tuesday.

Among commodities indexes, the benchmark Goldman Sachs price index fell 0.8% to a new five-year low at 144.22 points.

Overseas, Tokyo's Nikkei stock average rose 0.3%, Frankfurt's DAX index rose 0.2%, and London's FTSE-100 rose 0.15.


Market Roundup, D8

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