Dow Has Biggest Drop in Three Years
Wednesday’s stock market plunge handed the blue-chip Dow Jones industrial average its biggest one-day drop in three years, as some investors bailed out over worries the Federal Reserve would need to keep raising interest rates to fight inflation.
Markets also fell sharply overseas as some investors cashed out of this year’s strong rally, concerned by a larger-than-expected rise in U.S. consumer price inflation.
On Wall Street, the Dow slid 214.28 points, or 1.9%, to 11,205.61 -- its biggest decline since March 2003. The index has fallen 437 points, or 3.8%, since reaching a six-year high May 10.
The Standard & Poor’s 500 index fell 21.76 points, or 1.7%, to 1,270.32. The Nasdaq composite tumbled 33.33 points, or 1.5%, to 2,195.80.
The Russell 2,000 small-stock index fell 1.6%.
Losers swamped winners by nearly 5 to 1 on the New York Stock Exchange.
The Nasdaq now is down 0.4% for the year, although most U.S. and foreign market indexes still are in the black. The Dow is up 4.6% year to date; the S&P; 500 is up 1.8%.
Wall Street got the inflation chills before the market’s opening bell, when the Labor Department said the consumer price index rose 0.6% in April, above economists’ forecast for an increase of 0.5%. The core CPI, which excludes food and energy costs, advanced 0.3%, also faster than forecast.
Many investors had hoped that the Fed soon would pause in raising interest rates. But those hopes began to evaporate late last week, triggering a sell-off in stocks Thursday and Friday. The CPI numbers Wednesday fueled expectations that further hikes were unavoidable.
“It’s finally dawning on people that the Fed is going to have to keep raising rates until the economy slows,” said Edgar Peters, who helps manage $18 billion as chief investment officer at PanAgora Asset Management.
Bond investors also were spooked. The 10-year Treasury note yield jumped to 5.15% from 5.10% on Tuesday. Still, the yield remained below the four-year high of 5.20% reached Friday.
Prices of some commodities that have added to inflation pressures this year pulled back as investors focused on the potential for a slowing economy. Crude oil futures slipped on data showing U.S. gasoline reserves grew for a third week in a row. A barrel of light crude dropped 84 cents to $68.69 in New York.
Near-term gold futures eased $1 to $690.50 an ounce.
In a surprise to some analysts, the dollar rallied despite Wall Street’s plunge. The buck rose to 110.96 yen from 109.72 on Tuesday. The euro fell to $1.274 from $1.285.
The dollar may have been helped because many foreign stock markets fell more sharply than the U.S. market. The German market dived 3.4%, the Mexican market tumbled 2.8% and Brazil’s main stock index slid 2.9%.
Asian markets were mostly higher, but they closed before Wall Street opened for the day.
Among the day’s highlights:
* Goldman Sachs, JPMorgan Chase and Morgan Stanley helped lead declines among financial companies on worries about interest rates and the future of the stock bull market.
Goldman slid $4.49 to $148.21, JPMorgan Chase shed $1.07 to $43.25 and Morgan Stanley lost $2.07 to $59.99.
* Countrywide Financial, the biggest mortgage lender, sank $1.09 to $41.12. Fannie Mae, the largest mortgage-market financier, dropped $1.13 to $49.86.
* Indexes of basic-materials and energy shares had the biggest drops in the S&P; 500, down 2.7% and 2.6%, respectively.
Alcoa, the aluminum producer, retreated $1.48, or 4.4%, to $32.16 for the worst performance in the Dow index. Freeport-McMoRan Copper & Gold, owner of the world’s largest gold mine and second-largest copper mine, tumbled $3.69 to $56.94.
Among oil companies, Exxon Mobil sank $1.78 to $60.18 and Chevron fell $2.08 to $58.94.
* Boeing, 3M and Caterpillar helped lead industrial stocks lower on worries about the economy. Boeing slid $2.63 to $83.77, 3M lost $1.88 to $84.42 and Caterpillar sank $1.43 to $75.91.
* Hewlett-Packard provided one bright spot in the market, climbing $1.05, or 3.4%, to $32.16 for the only gain among the 30 Dow stocks. The personal computer maker expects fiscal third-quarter profit, excluding some items, of as much as 48 cents a share on sales of $21.8 billion.
Also in the tech sector, Google gained $3.20 to $374.50.
