Dow falls, off 247
Computer-driven selling
Star-Bulletin news services
and fears of overvalued stocks
send prices reelingNEW YORK -- The Dow Jones industrial average sank 247 points today as computer-driven selling and fears that the bull market has overvalued stocks sent prices spiraling. On Wall Street, the Dow ended at its lowest level in nearly seven weeks in a plunge that annihilated yesterday's modest gains.
After fluctuating through the day, the Dow plummeted 247.37 to close at 7,694.66, a drop of 3.1 percent. The point loss was second only to the record 508-point plunge of the Oct. 19, 1987 crash. But the percentage drop is nowhere near a record.
"It's on the ugly side," said Art Hogan, senior trader at Morgan Stanley, Dean Witter & Discover. "But most of it's program trading, investors selling futures and that drives down equities."
The selloff extended a 6.8 percent retreat from the record 8,259.31 set by the Dow on Aug. 6.
It was the steepest slide since the Dow plunged almost 10 percent in March and early April before returning to uncharted heights.
Today's decline was due at least in part to computer-driven selling typical of "double witching" days such as today, when options contracts expire on stocks and stock indexes.
But some investors attributed the decline to an overdue correction of a recent run that made many blue chip and other stocks overvalued.
But beyond such technical factors, which typically cause sharp swings in stock prices, were more fundamental concerns about interest rates and corporate profits.
"We don't have a bad economy, but earnings expectations are dramatically high and most of the big stocks are overvalued," said Michael Metz, who manages $425 million as chief strategist at Oppenheimer & Co. in New York.
Although wholesale and consumer price figures released by the government this week showed the economy growing with low inflation, investors are extremely nervous, particularly because the Federal Reserve's policy-making committee meets next week.
Fed Chairman Alan Greenspan has said that the nation's central bank is prepared to raise interest rates if a pre-emptive strike against inflation is needed.
On Wall Street today, declining issues led advancers by a nearly 3-to-1 margin on the New York Stock Exchange, with 187 up, 341 down and 184 unchanged.
New York Stock Exchange volume was 534.41 million shares vs. 530.52 million yesterday.
Broad market indexes were also lower. The Standard & Poor's 500-stock list fell 23.96 to close at 900.81, and the NYSE index dropped 10.56 to 469.10.
The Nasdaq composite index lost 24.66 to 1,562.03, and the American Stock Exchange composite was off 4.88 at 635.51.
The Associated Press and Bloomberg News
contributed to this report.
