Dow Drops 92 on New Asia Fears; Yields Slip

Stocks fell Wednesday as troubling developments in Asia negated excitement over a merger between Chrysler and Daimler-Benz.

The Dow Jones industrial average fell 92.92 points to 9,054.65. An early 32-point gain brought the blue-chip measure within 13 points of Monday’s record close of 9,192.66, but the Dow then drifted lower and fell sharply in the final hour.

Broad-market indicators also surrendered early gains amid reminders that the Asian financial crisis is far from resolved. In Indonesia, stocks tumbled 4.7% amid a third day of rioting over government price increases. Stocks fell 2.3% in Tokyo and 3.9% in South Korea.

U.S. shares opened higher, however, amid news that the maker of Mercedes-Benz automobiles might acquire Chrysler in a deal that could be worth nearly $40 billion. Chrysler shares soared $7.38 to $48.81 and Daimler’s U.S. shares rose $6.50 to $108.56.

The advance in the broad market quickly faded as investors refocused on the latest turmoil in Asia and Friday’s looming report on new jobs and wage levels, two key forces behind inflation.

The Standard & Poor’s 500-stock index fell 10.58 points to 1,104.92. The Nasdaq composite dropped 8.23 points to 1,856.68.

About three stocks fell for every two that rose on the NYSE, where about 606 million shares changed hands, above Tuesday’s 583 million.

“There was good news . . , but the stock market is latching onto negative news,” said Sung Won Sohn, chief economist at Minneapolis-based Norwest.

The market also was on edge over comments by Federal Reserve Board Vice Chairman Alice Rivlin, who said stock market values are “hard to justify.”

The bond market had a good day after the Treasury said it will borrow less than expected this quarter as the government prepares for its first budget surplus since 1969. The yield on the 30-year Treasury bond closed at 5.93%, down from 5.98% on Tuesday.

In a notable move, the Treasury also said it will no longer sell three-year notes after an auction next week and will shift its sale of five-year notes to quarterly from monthly. Bonds also got a boost after the Fed, in its regional economic survey known as the beige book, said growth was “moderate to strong” in March and April, though competitive pressures are keeping price increases in check.

In recent days, money managers such as Julian Robertson, chairman of the Tiger Management hedge fund, and Mark Mobius, president of the Templeton Emerging Markets fund, have warned that Thai, South Korean and other Asian stock markets are likely to sink again.

That prospect has made U.S. stocks somewhat more attractive to investors. An estimated net $8.81 billion poured into U.S. stock funds in the most recent week, dwarfing the previous week’s $280 million, Trim Tabs Financial Services said.

Among Wednesday’s highlights:

* Stocks with Asian exposure declined. American Express fell $2.94 to $99.50. The company reported last month that its overseas banking unit set aside $138 million to cover losses stemming from its business in Asia. Among banks operating in Asia, Citicorp fell $1.69 to $148, Chase Manhattan fell $2 to $135, BankAmerica slipped $2.25 to $82.31 and J.P. Morgan fell $1.69 to $132.88.

* Entremed, which soared Monday after a New York Times story appeared about the prospects for its two cancer drugs, lost $12 to $31.13. On Wednesday, it was reported that a Nobel laureate scientist disputes a quote the paper attributed to him, that Entremed is “going to cure cancer in two years.”

* Microsoft slid $1.38 to $86.38 after Chairman Bill Gates protested that a Justice Department blocking of the release of Windows 98 would disrupt the computer industry.

Other tech shares also declined, with Computer Associates off 81 cents at $60.31 and BMC Software down $2.19 at $89.56.

Cisco Systems rallied, though, up $2.38 at $76, after the computer-networking company said it earned 45 cents a share in for its fiscal third quarter, topping analysts’ forecasts by a penny, as it gained customers and added profitable products.

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Market Roundup, D8