FINANCIAL MARKETS : STOCKS : Rate Worries Spark Plunge; Dow Falls 38.74
The stock market dropped sharply Tuesday on interest rate worries that were compounded by congressional testimony from Federal Reserve Board Chairman Alan Greenspan, who gave little hope of easier credit soon.
The Dow Jones index of 30 industrials lost 38.74 points to close at 2,596.85. At one point during trading the Dow was down nearly 50 points.
In the broader market, declining issues outnumbered gainers by about 4 to 1 in nationwide trading of New York Stock Exchange-listed stocks, with 327 up, 1,257 down and 388 unchanged.
Big Board volume totaled 147.30 million shares, down from 166.84 million in Friday’s session.
Traders braced for a decline in stock prices at the opening bell after overnight drops in most major stock markets overseas. U.S. financial markets were closed Monday for Presidents’ Day, but U.S. Treasury bond prices had fallen in foreign trading.
Analysts said the tone for the session was set by rising interest rates in Japan and West Germany.
Upward pressure on worldwide interest rates has been widely cited as a primary force behind the stock market’s poor performance this year. Higher rates make interest-bearing investments more attractive than stocks and deter the Fed from stimulating the domestic economy.
Greenspan told Congress Tuesday that U.S. economic indicators are “more encouraging than otherwise.” Analysts interpreted his remarks to mean the Fed would not push rates lower any time soon.
Among actively traded blue chips, Philip Morris dropped 1/2 to 37 3/4, General Electric lost 1 1/8 to 60 7/8, AT&T; fell 3/4 to 39, IBM lost 5/8 to 102 7/8, and American Express lost 3/4 to 28 1/4.
McClatchy Newspapers Inc. closed up 2 1/4 at 21 5/8. Nordstrom, among the most active stocks in the over-the-counter market, was down 1 3/4 at 27 3/4, compounding a 3 1/4-point slide Friday.
The department store operator said earnings for the fiscal year ended last month were likely to show a decline. In addition, a Washington state agency ordered Nordstrom to pay back wages.
In Tokyo, share prices closed broadly lower, in sympathy with falling bond prices, but volume was light. The 225-share Nikkei index sank 327.08 points to 36,895.52, after Monday’s 238-point fall.
Prices were also sharply lower in London. At the close, the Financial Times 100-stock index was down 20.1 points at 2,277.0.
CURRENCY Dollar Ends Mostly Lower; Pound Rises The dollar ended mostly lower in moderate trading, but the British pound took center stage in foreign exchange, reaching a 10-month high against the U.S. currency here and abroad.
Foreign exchange dealers said concerns about higher interest rates abroad, particularly in Britain, West Germany and Japan, were largely responsible for the dollar’s drop.
Sterling fetched $1.7115 in New York, up from $1.6972 Friday. The pound is at its highest level since the end of April, traders said.
Gold prices rose. On the New York Commodity Exchange, bullion for current delivery settled at $419.90 an ounce, $2.80 higher than Friday. Republic National Bank in New York quoted a late bid for gold at $419.90 an ounce, up $2.65 from Friday.
COMMODITIES Platinum Futures Post Strong Gains Platinum futures prices surged to 2 1/2-month highs on the New York Mercantile Exchange, reflecting strong demand for the metal amid uncertainty about inflation, stock prices and South Africa.
On other major commodity markets, copper futures rose; energy futures were mixed; livestock and meat futures were mixed, and grains and soybeans were mostly lower.
Platinum futures settled $8.40 to $9 higher, with the contract for delivery in April up $9 Tables begin on D6
