Dow average drops 72 points as rate anxiety continues

March 31, 1994|By New York Times News Service

NEW YORK -- In a day that tested the faith of the remaining optimists on Wall Street, the stock market fell in heavy trading yesterday for the fifth consecutive session, with some traders predicting worse days ahead.

The Dow Jones industrial average twice dropped more than 50 points in a few minutes, and high-speed computerized trading sold tens of millions of shares in as little time.

Blue-chip stocks like General Electric and Exxon fell, as did popular high-technology stocks like DSC Communications, a telecommunications company, and Novell, a computer software developer.

The Dow plummeted 72.27 points, to 3,626.75, the steepest drop yet after four previous falls since the Federal Reserve Board raised short-term interest rates a second time March 22.

The Standard & Poor's 500 Index fell 6.93, to 445.55, and the Nasdaq Composite Index dropped 10.38, to 744.91.

Seventeen stocks fell on the New York Stock Exchange for every three that rose.

The steep decline in stock prices appears to have had its origins with the Fed's decision Feb. 4 to raise interest rates, pushing them up for the first time since 1989.

The responses by the stock and bond markets have gone beyond what either the Fed or most traders had expected from such a slight increase in February and another this month.

Yesterday, long-term interest rates were again the leading culprit behind the stock market's fall. The yield on the benchmark 30-year government bond, which helps set borrowing costs for large corporations and consumers, twice punched past 7.12 percent, a rate last seen in early February 1993.

The 30-year bond's yield settled yesterday at 7.09 percent, up from 7.06 on Tuesday.

Some Wall Street traders predicted another decline in stocks today, when two important government reports are due to be released. And Monday may be even worse, after investors take the long weekend, starting on Good Friday, to look back on the rubble of what had been predicted to be a quiet week.

While individual investors have largely stayed out of the trading fray in recent days, they are expected to join institutional investors like pension funds in the selling.

That prospect worries Jack P. Baker, senior managing director for Furman Selz Inc., a stock brokerage firm.

Mr. Baker fears that when individual investors, the mainstays of the financial markets, see television and newspaper reports about thestock market declines, they will rush to dump stocks, accelerating the stock market's fall.

Mutual funds reported yesterday that some investors were pushing to sell stocks, but relatively few so far.

"I don't want to even think it," Mr. Baker said, "but we could be looking at some 100-point drops here. This looks like a cash-raising, capital-preserving market, and people do indiscriminate things when that happens."

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