Friday, September 18, 1998

Dow loses 216 points as world markets boo central banks

By BRUCE MEYERSON

Associated Press

NEW YORK - The Dow industrials slid as much as 235 points Thursday as world stock markets jeered the wait-and-see stance on the global economic crisis taken by the Federal Reserve and central banks in other major nations.

The Dow Jones industrial average ended the day down 216.01 at 7,873.77, halting a four-session winning streak and giving back nearly half of the 475 points gained during that span.

Exactly two months after peaking at 9,337.97 on July 17, the Dow is back below this year's break-even point, 7,908.25, and about 1,465 points, or 15.7 percent, from record terrain.

Broader stock indicators also took a heavy beating on Thursday as the latest global selloff eroded much of the confidence that had been building since Friday.

While Wall Street shrugged off Wednesday's congressional testimony by Fed chairman Alan Greenspan, European markets tumbled early Thursday as Germany's central bank held its key lending rates unchanged, underscoring Greenspan's assertion that there's no multinational rate cut in the works.

Speculation about such an initiative sprang up on Monday when President Clinton called for the leading industrial powers to work together to contain the fiscal crises in Asia and Russia and stimulate the global economy.

Reinforcing that sentiment, finance ministers and central bank chiefs from the world's seven richest countries issued a joint statement that same day, stressing cooperation in dealing with the crisis.

While Greenspan didn't rule out a coordinated rate cut in the future, his remarks on Wednesday dampened hopes the Fed would lead the way by lowering its own key rates soon.

"There's no question that the market's disappointed that the (German) Bundesbank shelved this coordinated interest rate reduction," said Peter Canelo, U.S. investment strategist at Morgan Stanley Dean Witter, adding that the Fed may act on its own.

"They don't have much of a choice. Whether or not we go it alone, we will lower interest rates, although it's better if we do it in concert with everybody," said Canelo.

The global selloff sent money flowing into U.S. Treasury bonds, a traditional haven in times of uncertainty. Yields on 30-year Treasury bonds, a key influence on mortgage rates and other interest rates, fell to 5.18 percent, the lowest level since the government began selling such securities in 1977.

After leading the Dow's advance in recent days, financial shares suffered some of the heaviest damage on Thursday: J.P. Morgan fell 4-1/2 to 89-3/4, American Express fell 3 3/16 to 83-7/8, and Travelers Group fell 2 7/16 to 40 11/16. The Dow was also hurt by IBM, down 3-3/4 to 126-3/4; Alcoa, down 3-1/8 to 57 5/16; and Procter & Gamble, down 3 3/16 to 66 13/16.

The Standard & Poor's 500 fell 26.61 to 1,018.87, and the technology-heavy Nasdaq composite index fell 43.66 to 1,642.25 as Cisco Systems fell 3-1/8 to 61-1/2, Intel fell 2 1/16 to 83, and Microsoft fell 3-1/4 to 104 15/16.

Declining issues outnumbered advancers by an 8-to-3 margin on the New York Stock Exchange, where composite volume totaled 822.38 million shares, down sharply from Wednesday's pace.

The NYSE composite index fell 11.74 to 506.31, and the American Stock Exchange composite index fell 7.88 to 621.25.

The Russell 2000 index of smaller companies fell 4.56 to 355.29.

In Tokyo, the Nikkei stock average fell 2.4 percent to a new 12-year closing low. Frankfurt's DAX index dropped 3.9 percent, London's FT-SE 100 was down 3 percent and the CAC-40 in Paris was down 5.5 percent.

The main index in Brazil fell as much as 10 percent, automatically halting trading for a half hour, before finishing with a loss of 4.8 percent.