NEW YORK -- U.S. stocks staged their broadest decline yesterday in almost three months after the collapse of Britain's oldest investment bank heightened concern about similar instability among American banks and securities firms.
Financial issues slumped after London-based Barings PLC crumpled under the weight of about $1 billion in losses from speculative trading in Asian markets. The bankruptcy -- one of the largest bank failures in British history -- derailed a rally that took U.S. stocks to record highs last week.
"The big question now becomes how many of these little time bombs are ticking away in banks throughout the world, and when will they erupt," said John Gardner, chief investment strategist at Van Liew Capital, which manages about $300 million in assets.
The Dow Jones industrial average, which last week surged above 4,000 for the first time, fell 23.17 points, to 3,988.57. It was the average's first decline since a 33.88-point loss Feb. 17.
About 1,600 stocks fell for every 630 that rose on the New York Stock Exchange, the biggest disparity since decliners beat advancers by 1,272 stocks on Dec. 8.
General Electric Co., Aluminum Co. of America and International Business Machines Corp. were the biggest losers among the Dow industrials. GE fell $1.125, to $53.625, after the Supreme Court allowed 38 Philadelphia residents to go ahead with their suit to recover damages for environmental contamination at a local railroad yard. GE is one of seven defendants in the case.
Among broad market indexes, the Standard & Poor's 500 index dTC fell 4.3, to 483.96, after rising to a record 488.26 on Friday. The index's drop was its biggest since a 5.78-point slide on Dec. 8. Financial services were among the biggest losers.
Bankers Trust New York Corp. fell 75 cents, to $62.75; First Chicago Corp. slipped $1.25, to $49.875; J. P. Morgan & Co. lost 50 cents, to $63.625; First Fidelity Bancorp dropped 62.5 cents, to $50, Dean Witter Discover & Co. slumped $1, to $39.625; Merrill Lynch & Co. weakened 62.5 cents, to $40.375; and Travelers Inc. dropped 62.5 cents, to $39.125.
The Nasdaq composite index fell 6.59, to 784.49 -- its fifth drop in the last seven sessions. Losses in MCI Communications Corp., Amgen Inc., Cisco Systems Corp., LDDS Communications Inc. and Pioneer Hi-Bred International Inc. paced the decline.
Boston Scientific Corp. rose 87.5 cents, to $21.375, after the Federal Trade Commission on Friday approved the medical products company's mergers with Cardiovascular Imaging Systems Inc. and SciMed Life Systems Inc.
About 285.8 million shares traded hands on the NYSE, compared with the three-month average of 319 million.
Before Barings' disclosure this weekend, bank stocks had been doing well. The Standard & Poor's money-center bank index of seven stocks was up 12.5 percent amid optimism that interest rates won't rise further and squeeze banking profits.
The Barings collapse, though, "starts planting the seeds of doubt about whether this could happen to a firm at home," said Don Hays, director of investment strategy at Wheat First Butcher Singer in Richmond, Va.
Kevin Means, chief of equities at Aetna Life Insurance and Annuity Co., says Barings' collapse does not represent a "long-term" problem for U.S. equities. It does, though, "again raise the flag that senior management really doesn't know how to oversee these kinds of risky investments," he said.
To be sure, Thomas Gallagher, managing director in equity trading at Oppenheimer & Co., said "it's conceivable" U.S. stocks might benefit from Barings' collapse.
"I think you've got the flight to quality in the short end of the bond market," he said.