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 yields ended mostly lower after a wild day in which investors abandoned falling stocks to move to the safety of government securities. Gold also rose, as investors bought it for safe haven.

Stocks

The selloff, in which the Dow average ended off 21.61 points after falling nearly 105 during the day, was across the board, with nearly every sector suffering losses.

And even though buyers flocked back to the market in the afternoon, losing issues still swamped gainers 1,508 to 417 at the close--not a healthy sign, analysts said.

Among the market highlights:

* Many of the stocks that took the biggest morning hits were old-favorite growth issues that have come under increasing selling pressure this year.

Drug giant Merck, for example, fell as low as 40 1/2 during trading, though it closed at 42 7/8, off 1/8. Also, Coca-Cola dropped to 37 1/2 during trading, then rebounded to 39 3/8 at the close, up 1/8.

Analysts said the attacks on such stocks were worrisome, even though buyers did reappear later.

* 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.

Elsewhere, 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.

* Among the few big winners, 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.

* 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.

Overseas, 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 Nikkei average dropped 222.57 points to 17,101.50.

However, in Mexico City, the Bolsa index rose 64.63 points, or 4.7%, for its biggest one-day gain of the year. The 40-share Bolsa closed at 1,454.35 on heavy volume of 162 million shares.

Analysts said local investors found prices still attractive. Gov. Bill Clinton’s qualified endorsement of the North American Free Trade Agreement also was a positive, they said.

Credit

Bond yields rose at the opening but staged a quick turnaround when stock prices plunged. Analysts described stock investors’ move to the Treasury market a “flight to quality.”

However, long-term yields still rose for the day. 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 was 7.34%, up from 7.33% Friday.

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.

“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.

The federal funds rate was 3.125% by late afternoon, unchanged from Friday.

Currency

The dollar inched up against most major currencies.

The dollar rose to 119.75 Japanese yen in New York from 119.35 Friday. The dollar also bought 1.417 German marks, up from 1.4095.

The British 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.

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