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Stock Market’s Slide is Broad and Deep

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From Times Staff and Wire Reports

Investors who needed an excuse to sell stocks on Thursday were offered a boatload of them.

Start with some disappointing corporate earnings, add the revelation that Iran has been testing medium-range missiles, mix in another reminder of Japan’s shaky financials and top it off with news that President Clinton’s chief spokesman is departing.

By the close of trading the Dow Jones industrial average was down 195.93 points, or 2.2%, to 8,932.98, while the Nasdaq composite index tumbled 1.8%--and some analysts were warning that there could be more of the same in the near future.

Meanwhile, bond yields eased as some investors fled stocks for the relative safety of the bond market. Latin American stock markets took a drubbing with Wall Street. But early today in Asia the news was better: Despite Wall Street’s pullback, many Asian markets were off only modestly in morning trading.

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Thursday’s plunge in U.S. stocks had no specific trigger, but rather seemed the result of the weight of accumulated worries.

Although second-quarter corporate earnings have been widely expected to be weak because of the drag of Asia’s economic crisis and a slowing U.S. economy, some particularly bad reports on Thursday suggested that the current profit slowdown might be longer-lasting than investors want to believe.

Boeing, for example, stunned analysts with a 1999 profit estimate far below expectations.

Meanwhile, concerns about Japan’s beleaguered economy were heightened on Thursday after Moody’s Investors Service, the credit-rating agency, said it may cut Japan’s credit rating.

Investors also were still smarting Thursday from Federal Reserve Board Chairman Alan Greenspan’s testimony on Capitol Hill this week.

Greenspan gave no hint that the central bank is preparing to lower interest rates, despite the apparent slowdown in the U.S. economy in recent months.

Moreover, in testimony on Wednesday, Greenspan reminded investors that “history tells us that there will be a correction of some significant dimension” in the stock market eventually--though he did not hazard a guess as to when.

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Stocks began falling from the outset on Thursday, and ended the day at their lows--which could mean more selling today.

Losers swamped winners by 2,377 to 647 on the New York Stock Exchange and by 2,959 to 1,263 on Nasdaq, in very heavy trading.

The Nasdaq composite slumped 34.53 points, or 1.8%, to 1,935.22, also closing at its low for the day.

The Standard & Poor’s 500 index fell 2.1%, and the Russell 2,000 index of smaller stocks slid 1.9%.

The Dow now has lost 4.3% from its record high set last Friday.

The winner Thursday was the bond market, as some investors who sold stocks looked for safe haven.

The yield on the bellwether 30-year Treasury bond ended at 5.65%, down from 5.69% on Wednesday.

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Meanwhile, the dollar climbed as high as 142.08 yen, up from 141.24 on Wednesday before settling at 141.38 in New York.

In Latin America the Mexican market slid 1.8%, cueing off Wall Street. Earlier, European markets also were weak overall.

Among Thursday’s highlights:

* Few stock sectors were left unscathed by profit-taking. Energy stocks, which have been hammered in recent days on worries about low oil prices, plunged anew. Chevron plunged $2.56 to $81.56.

Also, drug stocks dove. Merck, which this week said 1998 earnings growth won’t be as good as hoped, sank $1.69 to $123.44. Other drug issues fared worse, with Pfizer down $4.94 to $111.44 and Warner Lambert down $2.56 to $78.94.

Amgen bucked the trend, up $4.75 to $76.31.

* Among blue chips, DuPont fell $2.50 to $60.94, IBM lost $3.56 to $123.88 and 3M fell $2.19 to $78.25.

* Retail stocks were sharply lower, led by Sears, down $5.38 to $51.94, and Wal-Mart, down $3.56 to $63.50. Like drug stocks, many retail issues have been highfliers this year.

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* Charles Schwab slid $3.63 to $39.25 after Chairman Charles Schwab told employees that the biggest discount broker isn’t for sale. It rallied in the last week after a report that a new underwriting arrangement between Schwab and Credit Suisse First Boston could lead to a merger.

Many other financial stocks, however, held up reasonably well.

* Despite the broad market’s plunge, Internet-related stocks were lower, but not dramatically. America Online sank $5.31 to $125.50, but Yahoo lost just $4.38 to $189.38 and Excite was off $2.44 to $46.44.

* Among the gainers, Computer Associates rebounded $1.13 to $41.56 after tumbling 31% Wednesday on a profit warning.

Market Roundup, D6

* MAIN STORY: Earnings shortfalls and Asia trigger widespread worry. A1

* MARKETS MERGER: Pacific Exchange, CBOE say they will merge. D4

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Slumping Sectors

The stock groups leading the market lower over the last week represent a cross-section of the economy, including energy, retailing and health-care. Sectors falling the most in the five sessions ended Thursday:

Oil exploration: --7.5%

General retailers: --7.7%

Textile makers: --7.8%

Aerospace: --8.0%

Department stores: --8.2%

Oil field services: --8.4%

Shoes: --8.4%

Machinery: --8.9%

HMOs: --9.3%

Oil/gas drilling: --11.9%

Source: Bloomberg News

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