Dow Dives 32.21 After Big Sell-Off in Japan

Wall Street lost its immunity today to the big stock sell-off in Tokyo, closing sharply lower after a rapid dive in the afternoon.

The Dow Jones industrial average closed down 32.21 points at 2,695.72, but above its low for the session. At around 2:25 p.m. EST, the index had fallen as low as 2,678.60, off 49.33 points.

Declining issues outstripped advances by around 3 to 1 on the New York Stock Exchange, with 1,194 down, 358 up and 410 unchanged.

Big Board volume totaled 175.93 million shares, up from 130.99 million in Wednesday’s session.

Losers outpaced gainers by a 4-to-1 margin.

It was the third straight decline on the New York Stock Exchange, following a vigorous rally in recent weeks.

Traders awoke in New York to find the Tokyo market had dropped by 3.13%, bringing its loss so far this year to about 23%. New York investors could not withstand the pressure of Tokyo’s loss and began taking profits.

“It’s a belated reaction to the Japanese market,” said Charles Jensen, an analyst for MKI Securities Corp. “We’ve been ignoring that market for a couple of weeks. You can only ignore reality for so long.”

“The market was overextended,” said Monte Gordon, vice president and director of research at Dreyfus Corp. “You would expect the market to retrace.”

Last week, the Dow Jones average of 30 industrials gained a net 57.89 points to 2,741.22, its highest level since early January. The advance continued on Monday, as the blue-chip barometer picked up another 14.41 points. But it stalled in Tuesday’s trading and the retreat was extended Wednesday and today.

Bond prices gained ground this morning as worries about the prolonged slide in Tokyo’s stock market attracted investors to the relative safety of U.S. government securities.

The dollar’s recent strong performance, tensions in the Soviet Union and uncertainty about German unification also drew buyers to the U.S. bond market.

The market’s benchmark 30-year Treasury bond spurted 5/8 point, or $6.25 per $1,000 in face value, more than recouping Wednesday’s loss of 3/8 point.

Its yield, which goes down when prices go up, fell to 8.43% from 8.49% late Wednesday.

“I suppose that we could probably describe it best as some form of flight to quality,” said Robert Brusca, an economist and fixed-income analyst at Nikko Securities Co. International Inc. “People are reminded that the United States continues to play a strong power role in the world economy.”

Weakness on Wall Street in the aftermath of another tumble on the Tokyo Stock Exchange also benefited bonds.