Stock Market Drops Today After Avoiding Crash Monday; Program Trading Halted
NEW YORK (AP) _ The stock market slid more than 75 points in afternoon trading today, erasing Monday’s partial rebound from an unexpected plunge and triggering curbs on computerized trading.
At 2 p.m. on Wall Street, the Dow Jones industrial average was down 75.58 points at 2,897.14. Trading was a heavy 164.85 million shares, and increasing as the day wore on.
Market professionals said the plunge indicated that the reality of a weak economy had set in. They said Monday’s 30-point gain in the Dow was due to technical factors and not any broad-based confidence in the market.
The malaise spread throughout stocks today, from big-company shares in the Dow to smaller over-the-counter shares, analysts said. On the NYSE alone, the number of issues falling outnumbered ones rising by about 7 to 1 in the afternoon.
″The bottom line is that the economy is not in such good shape,″ said Jeffrey Kaminsky, director of sales trading with Mabon, Nugent & Co.
Computer-driven program trading on the NYSE was restricted when the Dow average, the main market barometer, fell 50 points. The rule, designed to prevent declines from accelerating, was one of several implemented after the 1987 stock market crash.
″This is a follow through from last Friday,″ said Edgar Kam, a stock market analyst for Ernst & Co. ″Yesterday was a reflex rally, so to say.″
The Dow average, a widely watched average of 30 big-company stocks, had steadied itself Monday with a gain of 29.52 points after its sudden 120-point drop on Friday.
That drop, the fifth biggest point decline in history, had raised fears of another Black Monday, the name given to the 1987 crash.
Some pessimism returned to the market today after President Bush told reporters on Monday he was sticking by his decision not to offer an economic revival plan until January.
Contributing to the selling mood was a government report that the trade deficit widened to $6.53 billion in September, suggesting that the United States isn’t exporting its way back to economic health.
Stocks also were down in other world markets. In Tokyo, the Nikkei Average of 225 stocks closed moderately lower today, falling 73.26 points or about 0.3 percent to close at 23,326.86. In London, the Financial Times-Stock Exchange 100-stock index fell 39.8 points, or 1.6 percent, to close at 2,463.1.
Market professionals had said that despite Monday’s gain there were still no signs that the economy was emerging from the recession, and the stock prices of many companies remained unusually high relative to corporate earnings.
″I don’t see the market being up as saying the decline is over,″ said Christopher Pedersen, director of trading at Twenty-First Securities Corp. ″I see Friday as starting a gradual erosion in prices.″
The Oct. 19 crash in 1987 also was preceded by a major drop on a Friday. Since then, however, regulators and stock exchanges have imposed rules designed to keep stocks from falling too far, too fast.
Two years ago, the Dow dropped 190 points on Friday, Oct. 13, before regaining 88 points the following Monday. Several large drops earlier this year were followed by orderly trading, including one episode after the Soviet coup in August.
″It looks like investors are getting a little conditioned to these disruptive market breaks,″ said Stephen S. Roach, senior economist at Morgan Stanley & Co.