Dow Falls 21.61 in Selloff That Is Broad-Based
Market Overview
* A broad base of stocks joined the Dow Jones industrial average on a roller-coaster ride. Analysts said the turbulent trading underscored the economy’s bleak prospects and added renewed pressure on the Federal Reserve to cut interest rates.
* Treasury bond prices ended mostly higher after a wild day in which investors abandoned falling stock prices to move to the safety of government securities. However, as the stock market regained some of its losses, bond prices fell back.
Stocks
Traders said the selloff, in which the Dow Jones industrial average ended off 21.61 points after falling nearly 105 during the day, was across the board with nearly every sector suffering losses.
The frantic trading sparked new speculation on interest rates. Many economists forecast that further rate cuts could come at the end of a key meeting of Fed policy-makers today.
But they were not at all certain that a new round of rate cuts would have any more impact than 24 previous reductions in curing the sick economy.
Among the market highlights:
* Merck was the most active issue on the New York Stock Exchange, down 1/8 to 42 7/8, followed by Home Depot, down 1/8 to 53 1/2; International Business Machines, up 3/8 to 78 7/8; Telefonos de Mexico American depository receipts, up 1 1/2 to 46, and Philip Morris, down 5/8 to 82 3/4.
* Among widely held issues, American Telephone & Telegraph was off 3/8 to 41 7/8, General Motors up 1/4 to 31 1/8 and General Electric down 3/8 to 75 3/8.
* Marriott gained 2 1/8 to 19 1/4 in active trading after the lodging and food service company announced plans to split itself into two separate companies.
* One of the worst losers was Lifecore Biomedical, which fell 10 3/4, or 77%, to close at 3 1/4 as hopes for its surgical anti-adhesion product were dashed by news that clinical trials failed to show expected levels of efficacy.
* USAir Group fell 3/4 to 11 1/4. The airline cut back to 75% of its usual departures after ground crew workers went on strike.
* Symantec tumbled 3 1/4 to 7 1/4 on heavy volume of 3.3 million shares. The Cupertino, Calif., software concern estimated that it had an operating loss for the second quarter ended Oct. 2.
But several technology stocks gained, including Advanced Micro Devices, up 1/2 to 11 3/4; Compaq, up 1 1/4 to 33 3/4, and Storage Technology, up 7/8 to 24 3/4.
Alan Ackerman, executive vice president of Reich & Co., said weakness on foreign markets unnerved traders.
London share prices suffered their biggest one-day fall of 1992, triggered largely by the pound’s steep slide against the mark. The 100-share Financial Times index plunged 103.4 points to 2,446.3.
Frankfurt stocks fell to a 20-month low, largely on currency worries. The 30-share DAX index slipped 53.64 points to 1,424.400.
In Tokyo, shares ended down for the seventh day running, with investors put off partly by the yen’s gains. The 225-share Nikkei average dropped 222.57 points to 17,101.50.
Currency
The dollar rose against most major currencies on a day when overseas stock markets dipped and swayed.
The dollar rose to 119.75 Japanese yen in New York from 119.35 Friday. The British pound fell to $1.7135 from $1.7285. The dollar bought 1.4170 marks, up from 1.4095.
The pound continued to come under pressure against other European currencies, closing at 2.3942 marks, compared to 2.4361 Friday.
Dealers said the pound was hit by fears that the British government has failed to come up with an economic strategy after leaving the European exchange rate mechanism Sept. 16.
Credit
The price of the Treasury’s main 30-year bond closed 6/32 point lower, or about $1.88 per $1,000 in face amount. Its yield, which rises when prices fall, was 7.34%, up from 7.33% Friday.
Bond prices opened lower but staged a quick turnaround when stock prices plunged. Analysts described stock investors’ move to the Treasury market a “flight to quality.”
The Federal Reserve responded to the decline in stocks by injecting money into the banking system shortly before midday. The move was designed to restore confidence and encourage banks to make loans.
When stocks retreated from their lows, the bond market gave up some of its gains.
“At the very least, the market knows the Fed is aware of what’s going on and is trying to keep money cheap,” said John Sebastian, an executive vice president at Chicago-based Clayton Brown & Associates.
He said the Fed would like to see the federal funds rate, the interest on overnight loans between banks, lowered to about 3%.
The rate was 3.125% in late afternoon, unchanged from Friday.
Commodities
The stock market’s nerve-racking plunge sent ripples of worry through commodity markets, where the reaction ranged from a sharp drop in cattle futures prices to a strong gain for gold.
Commodities whose prices fell included oil and natural gas and most grain and soybean futures.
In precious metals trading, October gold rose $2.40 to $350.50 an ounce on the New York Merc. October silver climbed 1.5 cents to $3.749 an ounce.
Light, sweet crude for November delivery fell 15 cents to $21.77 a barrel on the New York Commodity Exchange. Natural gas for November delivery plunged 12.3 cents to $2.382 per 1,000 cubic feet.
Market Roundup, D8
