The biggest-point drop ever
shuts down trading a half-hour early

Star-Bulletin news services

NEW YORK -- The Dow Jones industrial average plummeted more than 550 points today for its biggest point loss ever, automatically shutting trading on U.S. stock markets for the first time since such rules were adopted in the aftermath of the 508-point crash of 1987.

The shutdown came at 3:30 p.m. in New York (10:30 a.m. Hawaii time) as losses mounted following a 30-minute trading halt that was ordered when the world's best-known stock market indicator had plunged more than 350 points. It took just 25 minutes to drop an additional 200 points.

The fall of 554.26 points to 7,161.15 was a drop of 7.2 percent, the biggest one-day percentage decline since Oct. 26, 1987, a week after the crash. But it was nowhere near the 22.6 percent plunge of Black Monday.

The selling spree capped a day of global turmoil on financial markets, touched off by a resumption of big declines in Hong Kong.

The selling, initially on worries over the financial future of the once-booming Asian economy, fed on worries over the prognosis for the bull market.

The Dow's drop of 13.3 percent since reaching its Aug. 6 peak of 8,259.31 was the first so-called "correction," a move down of more than 10 percent, since October 1990.

President Clinton was briefed on the stock market developments by Treasury Secretary Robert Rubin, said White House spokesman Mike McCurry.

"The president has watched and noted the developments of the day," McCurry said. "The president is confident the fundamentals of the American economy are strong. ... That's what matters most."

The Standard & Poor's 500-stock list fell 64.65 to 876.99, the NYSE composite index dropped 32.56 to 463.21, and the Nasdaq composite index lost 115.43 to 1,535.59.

The small-company dominated American Stock Exchange composite index lost 40.68 to close at 660.50.

Meanwhile, U.S. bonds surged and yields fell to the lowest in 20 months after the stock selloff drove investors to the safety of the Treasury market. The benchmark 30-year Treasury bond rose 1-1/4 points, or $12.50 per $1,000 bond, to 102-5/8. Its yield fell 9 basis points to 6.18 percent, the lowest since February 1996.

After the 1987 stock market crash, the New York Stock Exchange adopted new rules, often called circuit breakers, intended to slow a market fall. At 350 points, trading is halted for 30 minutes. After the 550 points, trading is halted for an hour. Since that barrier fell 30 minutes before closing, it ended the trading day.

In a message transmitted on the trading floor, the New York Stock Exchange said business would resume as usual at 9:30 a.m. EST (4:30 a.m. Hawaii time) tomorrow.

The Dow was plummeting while Clinton was at a Washington hotel delivering a speech before the Democratic Leadership Council, in which he credited the country's strong economy and shrinking budget deficit to his administration's policies.

Clinton was told that the 350-point circuit had tripped, and "wanted to learn more about it," McCurry said. He talked with Rubin by telephone once he returned to the White House.

McCurry described today's drop as "a bare fraction of major breathtaking drops in the past," and no reason for panic.

"We want everyone to just take a deep breath and think about where we are," McCurry said. "This is a market that has performed amazingly well ... so let's just be calm and reasonable."

Some investors looked on the turmoil as an opportunity.

David Malkin, of Vancouver, British Columbia, was touring the NYSE when the first trading halt took effect and was unfazed.

"It'd be a good time to buy ... we'll probably buy this afternoon or tomorrow," he said. "We've been expecting it. I went through '87, overreacted and sold. I wouldn't do that again."

Stock prices plunged as renewed selling in Asian markets sent shockwaves worldwide.

Hong Kong, whose 10 percent crash Thursday sent shivers around the world, again led the way with a 5.8 percent plunge in the blue-chip Hang Seng Index. It lost 646.14 points to end at 10,498.20 -- almost wiping out the nearly 7 percent recovery it made Friday.

Shares moved sharply lower on the London Stock Exchange, Europe's biggest market, and tumbled on the New York Stock Exchange, gaining momentum in the afternoon.

The Nasdaq Stock Market was off 6.9 percent just today, in part because of worries about the future revenue growth of technology companies that have major ties with Asia.

"People are looking any place they've had gains and taking them before this thing gets worse," said Larry Rice, chief investment officer at Josephthal, Lyon & Ross, noting that the heavy selling also spread to Latin American markets. "Our market, which was in dire need for a correction, has found the excuse it needs" to sell.

At the London Stock Exchange, Europe's biggest market, the Financial Times-Stock Exchange 100-share index dropped 129.5 points, or 2.6 percent, to close at 4,840.7 after a midafternoon comeback fizzled.

"The slide isn't going to go in a straight line. It's going to get hit today and then over the next two or three weeks we'll continue the slide," predicted Glen Poulter, a stock salesman at Schroders in London.

Elsewhere, Frankfurt's DAX index closed with a loss of 4.2 percent, while the CAC 40 in Paris finished with a loss of 2.8 percent.

The unsettled markets in Hong Kong also sent ripples spreading closer to home, in Tokyo, Seoul and Sydney. Tokyo's benchmark 225-issue Nikkei Stock Average lost 325.38 points, or 1.87 percent, closing at 17,038.36 points -- the lowest in more than two years.

"People can't buy shares until (markets in) Asia stabilize," said Seiji Fujimoto, a manager at the stock trading division of Tokyo Securities.

The Korea Stock Exchange's key index was down 3.3 percent, or 18 points, closing at a five-year low of 530.47. A major factor was the decline of the South Korean won to 942.9 to the U.S. dollar, from a Friday closing value of 929.5.

And in Sydney, the All Ordinaries Index was down 3.3 percent, led by an 11-percent fall in gold shares that wiped U.S. $690 million off their value. The Australian dollar has lost 2 cents since Friday to be worth 68.7 U.S. cents.

U.S. Treasury Secretary Robert Rubin said again today that because Hong Kong's market upheaval is only part of financial turmoil that has spread through Asia since summer, there will be no direct U.S. financial aid package like the bailout of Mexico in 1994. He said the United States would work with the International Monetary Fund and World Bank, as it already is in the cases of Thailand, the Philippines and Indonesia.

He expressed confidence a solution could be found.

"The countries of Southeast Asia have very great long-term strengths, and the thing what we all need to do now is work to re-establish their financial stability," Rubin said in New York before U.S. markets opened.

A four-day market slide of 25 percent in Hong Kong turned into a rout Thursday and triggered a global chain reaction from which there was a partial recovery Friday. In New York, the Dow slid a further 1.7 percent Friday to 7,715.41, adding to Asia's nervousness as a new week of trading began.

Sluggish trading today produced lesser declines in smaller markets like Jakarta, Thailand, Kuala Lumpur and Taiwan; only Singapore was up marginally. Results in the Philippines were mixed.

Regional markets were partially reflecting weaknesses in their national currencies, and partially taking their cue from Hong Kong, which until last week's crash had appeared a lone pillar of strength.

That changed when Hong Kong's currency, the only one in the region still pegged to the U.S. dollar, came under speculative attack and government counter-measures sent interest rates soaring. This drove down stocks.