Dow Dives 61.94 After Market in Tokyo Plunges : Securities: The 3.5% drop in the Nikkei average raises fears that Japanese investors may have to sell U.S. equities to obtain cash. Inflation worries are also a factor.
The Dow Jones industrial average tumbled 61.94 points Tuesday, a reaction in part to the Japanese stock market’s spectacular--and unabated--plunge.
As the Tokyo market opened today, unnerved traders there used the Dow’s drop as another excuse to sell--raising worries that New York and Tokyo now are locked in a downward spiral.
The Nikkei stock average plunged 602.27 points, or 3.4%, to end the morning session today at 17,189.28. That followed a 644.82-point loss Tuesday.
In the United States, stocks tumbled Tuesday partly on inflation worries fed by the recent rise in oil prices. But some traders also said Tokyo’s problems were beginning to worry American investors, helping set the mood for a selloff.
The Dow’s drop amounted to a steep 1.9% loss, and carried the blue chip index down to 3,213.55. It was the steepest plunge since a 120.31-point fall Nov. 15.
On the New York Stock Exchange, declining issues overwhelmed advancing ones by more than 3 to 1. Volume came to 205.21 million shares, up from Monday’s 179.91 million. Smaller stocks, which had been the market’s stars this year, fell even more sharply than the Dow. The NASDAQ composite index of smaller issues sank 14.68 points, or 2.5%, to 581.61.
“Across the board, everything was down,” said Mark Donahoe, trader at Piper, Jaffray & Hopwood.
“There is great cause for concern about Japan,” said Cummins Catherwood, an analyst at brokerage Rutherford Brown & Catherwood. “Everyone is apprehensive. They are losing some serious value over there.”
In Tokyo today, traders said the mood was panicky. They warned of a meltdown in stock prices as market players unloaded bank shares and other holdings.
Prices appear poised to plunge even further as companies sell their holdings of other corporate shares, dramatically increasing the volume of stocks available at a time when there are few buyers.
Japanese bank stocks have been hit especially hard by concern about their financial health as they strain to meet new international capital requirements.
In New York, meanwhile, analysts fear that the continuing losses in Tokyo could force Japanese investors to sell their U.S. equities to raise cash.
The U.S. market opened lower Tuesday and dropped suddenly in midafternoon. Traders said computerized orders to sell large quantities of stocks were triggered by a drop in stock-index futures contracts.
An NYSE restriction on program trading was activated when the Dow average fell 50 points. Traders said that helped slow the decline.
Transportation stocks were among the hardest hit because of fears about rising fuel prices, although oil futures eased Tuesday in what traders called a correction.
The Dow transportation index dropped 41.11 points, or 3%, to 1,312.22. UAL, parent of United Air, lost 10 3/4 to 129. AMR, parent of American Air, fell 4 to 67 1/2.
Among the market highlights:
* Big losers in the Dow index included Coca-Cola, off 2 1/2 to 80 7/8; J.P. Morgan, down 2 1/2 to 53 7/8; Procter & Gamble, off 3 to 97 3/4, and Disney, which fell 4 5/8 to 154 3/8.
* High-tech stocks were hard hit. Intel lost 1 5/8 to 56 1/4, Adobe fell 5 1/2 to 43, Novell lost 2 5/8 to 53 1/2, and Apple dropped 3 1/2 to 57 1/4.
* Retailers sank, led by California department store chain Gottschalks, which plunged 6 1/8 to 12 1/2 after posting lower-than-expected earnings.
Elsewhere overseas, Frankfurt shares managed to rise, edging up 4.80 points to 1,739.42. London also scored a small gain, the Financial Times 100-share average rising 3.3 points to 2,404.2.
Credit
Treasury bond yields fell as some investors dumped stocks for bonds, and as rumors continued that the Federal Reserve might ease monetary policy again.
The Treasury’s 30-year bond rose 3/16 point, or $1.88 per $1,000. Its yield eased to 7.88% from 7.89% Monday.
Short-term rates fell much more steeply: The discount rate on one-year T-bills dropped to 4.11% from 4.22% on Monday.
Currency
The dollar lost ground against major currencies except the Japanese yen, as U.S. stocks tumbled.
In New York, the dollar ended at 1.624 German marks, off from Monday’s 1.625. Against the yen, though, the dollar closed at 133.10 versus 132.90 Monday.
Commodities
Crude oil futures retreated on the New York Mercantile Exchange after rising in five of the six previous sessions.
Light, sweet crude for May fell 22 cents to $20.23 a barrel. However, analysts said an improving supply/demand situation suggested that prices would remain near current levels for the time being.
On New York’s Comex, April gold dropped $1.70 to $338.70 an ounce and May silver fell 2.7 cents to $4.08.
Market Roundup, D6
