Dow Falls Below 10,000--Briefly
The Dow Jones industrials briefly fell below 10,000 Friday as a whiff of inflation and a warning to investors by the Federal Reserve chairman sent stocks tumbling.
The drop below 10,000 lasted only moments, and the Dow fell no farther than 9,998.18. But the average still finished 266.90 points lower at 10,019.71 for its worst close since early April.
The Dow lost a record 630.05 points for the week, slicing 1999’s gain to about 9%. The measure of 30 major companies now sits 1,300 points below the record close of 11,326.04 set Aug. 25--when it was up more than 23% for the year.
Broader stock indicators also suffered heavy damage on Friday. The Nasdaq composite index fell 75.01 points to 2,731.83, and the Standard & Poor’s 500 fell 36.01 points to 1,247.41.
The sell-off followed a report revealing that prices at the wholesale level spiked 1.1% in September, the largest increase in nine years.
Meanwhile, in a speech to bankers Thursday night, Fed Chairman Alan Greenspan issued his latest warning about investor exuberance at a time of robust economic expansion and roaring stock markets.
Both developments aggravated market fears that the Fed will raise interest rates for the third time this year in a bid to fight inflation by slowing the economy. The board meets next on Nov. 16.
A host of other factors also conspired to spook the market, including rising interest rates in the bond market, another drop by the dollar in currency trading and the prospect of a crush of company profit reports next week.
Bonds at first fell sharply Friday and then rallied on flight-to-quality buying. The yield on the benchmark 30-year U.S. Treasury bond slid to 6.26% from 6.32% Thursday. The yield spiked to 6.37% after the PPI data was released, its highest level since Oct. 22, 1997.
The euro finished more than a full cent higher at $1.0898, while the dollar tumbled 1.93 yen to 105.42.
Gold prices rose amid inflation fears. Comex December gold gained $2.20 to settle at $316.40 an ounce.
Overseas markets posted sharp declines in response to Wall Street’s gyrations.
London’s FTSE 100 closed at 5,907.3 points, down 132.1, or 2.19%, off 292.1 from last week. In Tokyo, the Nikkei average weakened 178.69 points, or 1%, to close at 17,601.57, falling 460.61 over the week.
On Wall Street, financial companies, which could see demand for loans hurt by rising interest rates, led Friday’s decline. American Express fell $7 to $135 and J.P. Morgan fell $5.19 to $105.69--accounting for the equivalent of more than 70 points in the Dow’s retreat.
Elsewhere in the Dow, General Electric fell $4.38 to $115.75; Union Carbide fell $3.31 to $53.75. Among leading Nasdaq technology names, Microsoft fell $2.63 to $88.06.
Other market highlights:
Sun Microsystems rallied $3.16 to $92.56 in Nasdaq trading after Thursday’s better-than-expected profit report.
Chubb fell $1.94 to $46.69. The property-and-casualty insurer said third-quarter earnings would be 40 cents to 45 cents a share because of claims from last month’s Hurricane Floyd. Analysts had predicted earnings of 93 cents.
Market Roundup, C4
