Stocks Tumble Again as Profit Woes Spread

Stocks worldwide suffered another sharp sell-off on Thursday, amid fears over slowing global growth and disappointment over Federal Reserve Board Chairman Alan Greenspan’s seeming reluctance to cut interest rates.

After major declines in European markets tied to an earnings warning from France’s Alcatel, the Dow Jones industrial average plunged 216.01 points, or 2.7%, to 7,873.77, closing near its lows for the day.

The broad market also was slammed, as losers swamped winners by 22 to 8 on the New York Stock Exchange.

Investors again ran to the Treasury bond market for cover, pushing the bellwether 30-year T-bond yield to a record low 5.18% from 5.22% on Wednesday.

Asian markets set a poor tone for the rest of the world on Thursday, as Japan’s main market index slumped 2.4% to 13,859.14--a new 12-year low.

The latest bout of selling in Japan was triggered by concern that local governments have such poor balance sheets they will be forced to sell real estate holdings to raise cash--further depressing the property market.

The Tokyo metropolitan government will declare a state of emergency next month and expects tax revenue to fall by about $3 billion, the Yomiuri newspaper reported.

Other Asian markets also fell, including Hong Kong, which lost 3.6%, and South Korea, which eased 0.7%.

When Europe opened for business, markets were shocked by telecom equipment giant Alcatel’s warning that operating profit would fall short of expectations this year due to the weaker sales in Asia and Russia.

Shares in the company, one of France’s biggest industrial groups, plummeted 38% in Paris trading--the single-biggest decline in French stock market history.

“This is a major shock,” said Patricia d’Ille, a portfolio manager at Bacot-Allain Gestion in Paris. “If there’s one company that one wasn’t expecting this kind of bad news from, it’s Alcatel.”

*

Investors dumped stocks across Europe, fearful that strong profit growth expectations for many companies will be ruined by weaker sales to many beleaguered developing markets.

“We have a financial crisis around the world,” said Michael Raude, a fund manager at Gruber, Haering, Raude & Partners in Switzerland. “As long as risk remains high, stocks are not a good place to be invested.”

The French stock market plummeted 5.5%, while German stocks dove 3.9% and the British market sank 3%.

That helped trigger a dive in the U.S. market at the outset of trading. Indeed, the Dow suffered most of the day’s loss in the first 90 minutes of trading.

The Dow’s setback erased nearly half of the 474 points the index had gained over the previous four sessions.

In the broad market Thursday the Nasdaq composite slid 2.6% to 1,646.25, the Standard & Poor’s 500 fell 2.6% to 1,018.87 and the Russell 2,000 index gave up 1.3%.

“You have a market that’s very nervous,” said Robert Froehlich, chief investment officer at Van Kampen American Capital. “Everybody’s trying to determine if we’ve hit bottom. In a global marketplace, nothing is done in isolation.”

Analysts said investors worldwide also were disheartened after Greenspan’s testimony on Capitol Hill on Wednesday. The Fed chief indicated there is no plan for a concerted reduction in interest rates by major Western central banks--an effort which, proponents say, would help spur growth and fight the debilitating effects of currency devaluations in Asia, Russian and Latin America.

Stock markets in the latter region also were hammered on Thursday, after rallying in recent days from two-year lows. Brazil’s market sank 4.8%. The Mexican market lost 0.6%.

Selling on Wall Street also was attributed to traders unwinding positions in advance of today’s “triple-witching” session, when stock and stock-index options and futures will expire--a day that can mean volatile trading of the instruments’ underlying stocks.

Among Thursday’s highlights:

* Alcatel’s announcement sent other telecom stocks tumbling. Nokia dropped $5.81 to $75.50, Lucent Technologies slid $4.25 to $72.13, Northern Telecom tumbled $6 to $39.56 and BellSouth fell $2.19 to $70.13.

But Ascend Communications bucked the trend, rising $2.63 to $47.56.

* Among U.S. multinationals, Gillette slumped $3.31 to $36.88--bringing its loss from its 52-week high to 41%--after warning Wednesday that sales this quarter could fall because of weak Asian and Latin American economies.

Elsewhere in the consumer sector, Procter & Gamble lost $3.19 to $66.81, Revlon fell $2.06 to $31.94, Colgate-Palmolive sank $4 to $68.50 and Clorox dove $5.06 to $82.19.

* Selling renewed in the hard-hit financial sector. Merrill Lynch dropped $2.94 to $56.06, Chase Manhattan fell $2.06 to $47.88, Citicorp lost $6.50 to $96.25, J.P. Morgan tumbled $5.75 to $89.50 and Imperial Bancorp fell $2.50 to $13.19.

* J.B. Hunt Transportation plunged $5.88 to $16.50--or 26%--after the freight-trucking concern said its third-quarter results would come up short of expectations.

* On the plus side, gold stocks gained as bullion prices rose. Newmont Gold gained $1.25 to $22.06 and Battle Mountain rose 50 cents to $5.19.

Market Roundup, D6