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Dow Plummets 210 as Stocks Extend Sell-Off; Bond Yields Decline

October 02, 1998|From Associated Press

Stocks plunged again Thursday as global economic fears reached a new pitch, slicing more than 200 points off blue chips for a second straight day.

The Dow Jones industrial average had been down as much as 260 points Thursday before finishing the session with a 210.09-point loss at 7,632.53. That close is a three-week low and fewer than 100 points above where the barometer sat Aug. 31, when it closed down 512 points.

U.S. bond prices, meanwhile, rose for a third day, as investors who are worried about the prospect of a worldwide economic slowdown sought refuge from stocks in Treasuries. Bond yields were pushed to depths not seen since 1967. The yield on the benchmark 30-year Treasury bond fell to 4.88% from 4.97% on Wednesday.

"Things are worse than anyone's willing to admit at this point," and that's helping to support Treasuries, said Kevin McClintock, head of taxable fixed-income investments at Dreyfus Corp., which manages more than $90 billion in assets. "Recession is going to be difficult to avoid in the U.S., and there're more international events yet to be heard about."

Broader indicators also tumbled as investors dumped stocks in finance and technology, the two sectors whose stocks have suffered just about every time worries about foreign economic turmoil have flared over the last year.

The technology-heavy Nasdaq composite index sank nearly 5%, falling 81.51 points to 1,612.33 after losing 40 points Wednesday--making for a two-day loss of 6.9%. The Standard & Poor's 500-stock index extended Wednesday's 32-point drop, closing off 30.62 points at 986.38 on Thursday, down 5.9% for the two sessions.

The Dow is now nearly 300 points, or 3.5%, below this year's break-even point of 7,908.25. It ended the day about 1,700 points, or 18.3%, below the record high of 9,337.79, set July 17. Wednesday's 237-point slide left the Dow with a 12.4% loss for the third quarter and with the worst quarterly performance in eight years.

The two-session downturn has been fueled by worries that Tuesday's quarter-point Federal Reserve interest rate cut was not big enough to make much difference in easing the economic strain of the financial crisis crippling Asia and Russia and threatening Latin America.

Foreign markets also fell sharply Thursday, rattled by Wall Street's steep decline on Wednesday and frustrated by the German central bank's decision to leave its key lending rates unchanged.

Adding to the negative sentiment were some discouraging reports from the International Monetary Fund and Japan's central bank, as well as continuing concern that last week's near-collapse of a major hedge fund, Long-Term Capital Management, might be only the first of many bullets the world's shaky financial system will have to dodge.

"There's a lot of fear out there, without a question," said John Lynch, director of investment strategy at Interstate/Johnson Lane in Charlotte, N.C., noting that disappointment with the Fed has carried more weight among investors than the drop in long-term lending rates to historic lows in the bond market.

Thursday's stock sell-off came as a national association of factory executives, in the first broad reading on the just-ended month, reported that U.S. manufacturing slowed again in September as exporters continued to be hurt by the trouble overseas. The drop was smaller than expected, but it nevertheless represents a fourth straight month of declining activity.

The Dow's biggest decliners included American Express, down $4.13 at $73.50; J.P. Morgan, down $3.63 at $81; and IBM, down $3.13 at $125.38. Among leading Nasdaq technology names, Dell Computer fell $4.19 to $61.56 and Microsoft fell $6 to $104.06.

But the selling was hardly confined to the financial and technology sectors. The Dow's big losers also included investor favorites General Electric, falling $4 to $75.56, and Merck, declining $4.56 to $125.

Declining issues outnumbered advancers by a 3-1 margin on the New York Stock Exchange; Nasdaq decliners posted a 4-1 lead. NYSE volume totaled 899.75 million shares, up from 816.39 million on Wednesday.

The NYSE composite index fell 14.25 points to 490.22. The Russell 2,000 index of smaller stocks fell 13.55 points to 350.04.

In Tokyo, the Nikkei-225 stock average set another 12-year low Thursday, falling 1.6% as a new survey by Japan's central bank reported that confidence among Japan's small and medium-sized businesses plunged to its lowest level since the Bank of Japan began doing quarterly surveys in 1967. Sentiment among major manufacturers fell to its lowest level in 3 1/2 years.

In Europe, Frankfurt's DAX index fell 5.5%, London's FTSE-100 fell 3.1% and Paris' CAC-40 fell 5%.

Market Roundup, D6

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