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Stocks slide; Dow tumbles 1.6 percent |
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April 28, 2000
NEW YORK, APR 27 (AP) - Stocks tumbled Wednesday after the latest sign of economic growth brought interest rate worries to the foreground for the first time this week. Blue-chip stocks that have failed to live up to the market's robust profit expectations led the decline.
On Wall Street, the Dow Jones industrial average fell 179.32, or 1.6 percent, at 10,945.50.
The Nasdaq composite was down 81.14, or 2.2 percent, to 3,630.09.
Broader stock indicators also fell.
According to preliminary calculations, the Standard and Poor's 500 fell 16.15 to 1,460.99. Declining issues outnumbered advancers by a 10-to-9 margin on the New York Stock Exchange, with 1,533 down, 1,426 up and 494 unchanged.
NYSE volume totaled 979.71 million shares as of 4 p.m., vs. 1.06 billion in the previous session.
The Russell 2000 index of smaller companies fell 4.79 to 484.24. A day after the Dow and the Nasdaq each rose more than 200 points, many buyers retreated to the sidelines, debating their next moves. Selling gathered momentum in the final hour of trading as investors unloaded stocks in advance of a pair of crucial economic reports due out Thursday - the gross domestic product and the employment cost index.
On Wednesday, the market was rattled after the Commerce Department reported orders to U.S. factories for big-ticket manufactured goods rose in March for the first time this year.
The durable goods report revived fears that the Federal Reserve will continue raising interest rates in an effort to force a slowdown of the economy. The Fed has raised rates five times since last June, and many economists expect the Fed to bump up rates again on May 16.
"If the Fed is looking for signs of moderation, they won't find it" in the durable goods report, said David Orr, chief economist at First Union Securities.
The report stimulated worries that Thursday's reports will show the economy is growing too quickly. Most analysts expect the GDP report to reveal that the economy grew at a 6 percent rate in the first quarter - too fast for the Fed's comfort, but not as brisk as the 7.3 percent rate posted in the fourth quarter of 1999.
The government will also release the latest employment cost index - a gauge of wage pressures which Fed Chairman Alan Greenspan considers a crucial barometer of the economy.
"There's a latent fear that if those numbers are stronger than expected, it will force the Fed to be aggressive about raising rates," said John Shaughnessy, chief investment strategist at Advest Inc.
Worries about rising interest rates hurt financial services stocks, which typically suffer when higher rates crimp lending volume. Citigroup and J.P. Morgan fell, weighing heavily on the Dow.
Corporate earnings reports provided the only real spark in the market. Investors continued punishing the blue-chip companies that failed to impress Wall Street with their profit reports. Procter and Gamble and 3M fell sharply for a second straight session.
Compaq Computer edged higher. Late Tuesday, the computer maker reported that excluding gains in its investment portfolio, first-quarter net income and revenues were virtually unchanged from a year ago.
Online auctioneer eBay finished lower after giving up early gains. The company's first-quarter operating results exceeded Wall Street expectations as the amount of merchandise sold on its site surpassed dlrs 1 billion for the first time. Also, eBay announced plans to split its stock 2-for-1.
Still, a wide range of technology stocks were higher. Sam Stovall, senior equity strategist at Standard and Poor's, said he expects the technology sector to regain leadership of the market in the coming quarters.
"We're advising investors to take advantage of periodic price weakness in technology," he said. "Those companies will have the strongest profit growth."
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