Front page of my paper this morning. Why do I have to read this clown stuff at home? -vbg-
Big hit for Big Board
THE ASSOCIATED PRESS
NEW YORK -- Stocks tumbled again yesterday, knocking nearly 300 points
off the Dow Jones industrial average, as investors reacted to news that
higher interest rates are almost inevitable in spite of inflation being
in check.
Stocks from nearly every sector dropped as traders digested Thursday's
warning from Federal Reserve Chairman Alan Greenspan that interest rates
would need to go higher to prevent the U.S. economy from causing a surge
in inflation.
"Why would stocks be up? The stocks that have driven the market are
selling for ridiculous prices, and Greenspan has indicated interest
rates will increase ad infinitum," said Bill Meehan, chief market
analyst at Cantor Fitzgerald & Co.
The Dow Jones industrial average fell 295.05 to 10,219.52, its
seventh-largest one-day point drop. The Dow, down 205.69 over the week,
has now fallen more than 12 percent from its Jan. 14 record high close
of 11,722.98.
The Nasdaq composite index fell 137.18 to 4,411.74 just a day after
having set its own closing high of 4,548.92. Yesterday's decline, the
Nasdaq's seventh-biggest one-day point drop, left it up 16.29 for the
week.
The Standard & Poor's 500 index, the market's broadest indicator, fell
42.16 to 1,346.09.
Yesterday's decline, along with the recent slide in blue-chip stocks,
appeared to fit a pattern that began in the market last year, with
interest rate concerns setting off a series of sharp drops that then led
to waves of buying.
In addition to inflation fears, trading was volatile yesterday due to
"double witching," the simultaneous expiration of contracts on options
on stocks and stock indexes. Traders also sold off ahead of the
three-day holiday weekend. U.S. markets are closed Monday in observance
of Presidents Day.
Inflation fears grew yesterday even as the Labor Department said
January's Consumer Price Index edged up a smaller than expected 0.2
percent as lower clothing prices helped offset rising fuel costs.
The report did little to comfort investors after Greenspan told Congress
Thursday that higher wages, driven by the tight labor market, would lead
to a rise in inflation. He warned that the Fed will raise interest rates
again this year after four increases over the past eight months.
The decline "is a delayed reaction to Greenspan's comments from
yesterday," said Peter Coolidge, head of equity trading at Brean Murray
& Co. "Investors are starting to take to heart that interest rates are
going higher and that's bad for stocks."
Tom Galvin, chief equity strategist at Donaldson, Lufkin & Jenrette
Securities, noted that many Dow stocks "are being unmercifully punished
and it's extended into some profit taking on the Nasdaq."
Twenty-seven of the 30 Dow stocks closed lower, including International
Paper, off 1 15/16 to 44 5/16 and IBM, down 4 1/8 to 112 5/8 .
Two of central New Jersey's largest employers, AT&T Corp. and Lucent
Technologies Inc., lost ground in the sell-off. AT&T closed at 47 9/16,
down 2, and Lucent closed at 52 1/4, down 1 1/4.
Among companies either located in New Jersey or with substantial
operations in the state, the biggest decliners were Bristol-Myers Squibb
Co., closing at 59 3/4, down 3 3/4; Bed Bath & Beyond Inc., 25 1/4, down
3; Schering-Plough Corp., 36, down 2 7/8; Honeywell International Inc.,
44 5/16, down 2 1/8, and Warner-Lambert Co., 88 1/8, down 2 1/8,
Although technology stocks have withstood fears about higher interest
rates, they joined in the market's tumble yesterday as traders collected
profits from the gains they have made this month.
On the Nasdaq, big decliners included Microsoft, down 4 9/16 to 95 1/16
and Intel, down 4 5/8 to 105 3/8. Novell, a big network software maker,
slid 8 15/16 to 34 1/8.
Many Internet stocks fell too, including Amazon.com down 4 1/2 to 64 3/4
and America Online off 2 1/8 to 50 7/8.
"As Yogi Berra would say, 'It's deja vu all over again,' " said Ned
Riley, chief investment strategist for State Street Global Advisors.
"The same issues, the same problems the Fed had at the end of last year,
it is confronted with all over again."
The economy is still growing and the inflation data is still benign, but
the Fed still expects to see inflation -- the questions are when and in
what form, Riley said.
Caught up in the selling were the recently hard-charging biotech stocks,
including Biogen, down 6 9/16 to 109 5/16 and Genentech, down 2 3/8 to
158 5/8.
Interest-rate-sensitive financial issues also fell, led by American
Express, off 10 1/16 to 137 7/8 and J.P. Morgan, off 3 1/2 to 109 3/8.
Among telecommunications companies, SBC Communications was down 3 9/16
to 36 7/16 and Sprint was off 2 7/16 to 63 1/4. |
