Dow has second-worst point drop ever; Now down 7 percent in seven days
NEW YORK (AP) _ The Dow Jones industrial average, which soared 1,900 points in four months, gave up 247.37 points Friday as it spiraled to its second-worst point drop ever.
The drop, which sent the Dow to 7,694.66, wiped out last month’s exhilaration over topping the 8,000 mark and every recorded plunge except the 508-point Black Monday crash of Oct. 19, 1987.
The selloff capped a dizzying seven-day decline of 565 points, or almost 7 percent, from the rarefied height of 8,259.31 reached Aug. 6.
But at 3.1 percent, Friday’s decline _ prompted largely by computer selling programs and fears that the bull market has overvalued stocks _ pales in comparison with the 22.6 percent freefall in 1987. Investors viewed the plunge as the correction _ or part of the correction _ many have been waiting for.
``This is a bit of a pause after a hell of a run,″ said William M. Lefevre, senior market analyst at Ehrenkrantz King Nussbaum.
Traders are worried about inflation, interest rates and the outlook for corporate earnings. But they also were aware that even with the selloff, the Dow is up more than 19 percent this year, double what many analysts had been expecting for all of 1997.
In yet another day of gyrations, the Dow Jones industrial average stumbled badly in the final 30 minutes of trading Friday, for the lowest close since June 30.
The selloff extended to 6.8 percent the retreat from the record set last week and marked the steepest slide since the Dow plunged almost 10 percent in March and early April before returning to uncharted heights.
Stocks were led lower as interest rates rose in the bond market. The decline on Wall Street was aggravated by computer-driven selling typical of ``double witching″ days such as Friday, when options contracts expire on stocks and stock indexes.
Beyond the Dow, broader market indexes also tumbled.
Declining issues outnumbered advancers by a nearly 3-to-1 margin on the New York Stock Exchange, where volume totaled 534.41 million shares as of the 4 p.m. close vs. 530.52 million in the previous session.
The Standard & Poor’s 500-stock list was down 13.14 at 911.63, and the NYSE composite index fell 10.56 at 469.10.
The Nasdaq composite index was down 24.65 at 1,562.04, and the American Stock Exchange composite index was off 4.88 at 635.51.
Some investors said the decline was overdue after the market’s wild ride to the record books. But there also are more fundamental concerns about the course of interest rates and corporate profits, especially in advance of a meeting Tuesday by Federal Reserve Board policy-makers.
Fed Chairman Alan Greenspan has said that the nation’s central bank is prepared to raise interest rates if a pre-emptive strike against inflation is needed.
While the Fed is not expected to push up interest rates next week to cool off an economy that has been growing for seven years, such a move would slow consumer spending and raise corporate operating costs.
``I think what the market is telling us is we need some more time for this correction to unfold,″ said Anthony O’Bryan, market analyst for A.G. Edwards & Sons in St. Louis.
Meanwhile, research analysts lowered their predictions for Gillette Co.’s third-quarter earnings, which raised concerns about disappointing earnings from other companies.
Gillette fell 4 3/16 at 85 7/8.
Among the 30 Dow industrials, 29 fell, led by Procter & Gamble, down 7 11/16 at 136 3/4, followed by General Electric, off 4 at 62 3/4. IBM fell below 100, declining 3 11/16 to 99 15/16.
The lone Dow winner was Eastman Kodak, up 1/4 at 63 3/8.
Overseas, Tokyo’s Nikkei stock average closed up 0.5 percent. Frankfurt’s DAX index was down 1.9 percent and London’s FT-SE 100 was down 2.5 percent.