Nervous sellers depress stocks

Dow drops 205 points

Nasdaq tumbles 108, its 4th-largest fall ever

September 24, 1999|By BLOOMBERG NEWS

NEW YORK -- Stocks plummeted yesterday as investors sold heavily amid continued worries about higher interest rates and the strength of the dollar. A Microsoft Corp. executive's warning that technology stocks are overvalued robbed the market of a big source of strength.

The Dow Jones industrial average fell 205.48, or 2 percent, to close at 10,318.59. That brought the Dow's decline over the past three sessions to 505.31 points, or 4.5 percent.

This week's sell-off has left the Dow more than 1,000 points below its Aug. 25 closing record of 11,326.04. That's a drop of 8.9 percent -- just shy of the 10 percent drop analysts use to define a market correction.

Broader stock indicators also fell steeply yesterday. The Standard & Poor's 500 index fell 29.74, or 2.3 percent, to 1,280.77, led by software, computer, semiconductor and communications equipment shares. Microsoft is the most heavily weighted stock in the S&P 500, accounting for 4.4 percent.

The Nasdaq composite index fell 108.33, or 3.8 percent, to 2,749.83, its fourth-biggest decline.

Elsewhere on the broad market, the Russell 2,000 index, a benchmark of small-cap stocks, skidded 7.32 to 420.21; the Wilshire 5,000 index plunged 270.80 to 11,704.11; the American Stock Exchange composite index dropped 4.95 to 777.50; the New York Stock Exchange composite index sank 10.18 to 590.98; and the S&P 400 midcap index slid 9.16 to 384.83.

The Sun-Bloomberg Maryland index of the top 100 Maryland stocks slumped 3.44 to 187.87.

Declining issues outnumbered advancers by a 5-to-2 margin on the New York Stock Exchange, where trading volume totaled about 890.9 million shares.

Yesterday's decline was broad-based, even as blue-chip stocks made some short-lived attempts to reverse their decline. In early afternoon, the Dow abandoned a brief rally that pushed it as much as 48 points above Wednesday's close.

The quick erosion of the buying spree reinforced concerns about the market's condition, as both the Dow and the S&P 500 tumbled below so-called technical support levels. Traders said the Dow's drop below 10,500 and the S&P's drop below 1,300 prompted additional selling, due partially to computer-driven trading and partially to the heightened sense of the market's troubles.

"The market is under the weight of so many threats right now," said Scott Bleier, chief investment strategist at Prime Charter Ltd., mentioning rising interest rates and the tumbling dollar.

"There's no new fundamental reason for the weak market, but there's a great deal of nervousness," said William Meehan, chief market analyst for Cantor Fitzgerald.

Stock investors brushed aside any news that could have supported stocks. Bond yields plummeted to 5.98 percent on the 30-year Treasury bond from 6.08 percent late Wednesday.

The market also discounted a modest rise in the dollar against the Japanese yen. In late New York trading, the dollar was quoted at 103.95 yen, up from 103.93 late Wednesday.

Still, the U.S. currency is lingering near its lowest levels against the yen since 1996. The dollar's weakness has contributed to a sharp decline in U.S. stocks this week.

The market was unnerved by a Labor Department report that showed the number of Americans filing new claims for unemployment benefits fell unexpectedly last week to the lowest level in 25 years, fostering fears that companies will have to increase wages and benefits to attract skilled workers. That, too, could set the stage for a revival of inflation, and for an increase in interest rates when the Federal Reserve meets Oct. 5.

While the weaker dollar and interest rate fears have frozen many stocks in recent weeks, strength in leading technology companies has brought the Nasdaq to records, and kept the broader market from falling into a swoon.

But that strength evaporated yesterday after Microsoft President Steven A. Ballmer said at a conference that technology stocks are too high-priced.

"There is such an overvaluation of tech stocks that it's absurd," he said. "I would put our company, and I would put most companies, in that category."

Microsoft investors heeded his warning, sending its shares down $4.875 to $91.1875. Dell Computer Corp. fell $3.0625 to $43, and Yahoo! Inc. dropped $5.75 to $173.75.

The Dow's technology components plummeted as well. International Business Machines Corp. lost $3.1875 to $122, and Hewlett-Packard Co. fell $4.3125 to $94.375.

Semiconductor companies added to the weakness amid concerns that the earthquake in Taiwan this week will hurt production. Intel Corp. plunged $5.3125 to $77.50, and Texas Instruments Inc. fell $2.75 to $83.875.

AlliedSignal Inc., a maker of aircraft parts, fell $3.875 to $59.75.

Georgia-Pacific Group, a forestry products company, declined $5.8125 to $38.8125.

Honeywell Inc., which makes automation and control systems, lost $6.8125 to $111.375.

Rite Aid Corp. fell $2 to $12, a day after the third-largest U.S. drugstore chain was accused of overcharging 29,000 uninsured prescription drug customers in a racketeering suit filed by Florida's attorney general.

CollaGenex Pharmaceuticals Inc., a maker and marketer of dental drugs, rose $7.0625 to $22.375 after it said it won a contract to promote Merck & Co.'s Vioxx painkiller for dental use.

Overseas, Japan's stock market was closed for a national holiday. European indexes rose after the European Central Bank left interest rates unchanged. Germany's DAX index gained 1.2 percent; Britain's FTSE 100 rose 0.9 percent; and France's CAC-40 rose 0.7 percent.

Pub Date: 9/24/99

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