Dow sinks 357
as Russia reels
The blue-chip index has hit
a 12% correction from
its July 17 highNEW YORK -- The Dow Jones industrials sank more than 350 points today and markets around the world slumped as Russia's financial crisis drove investors from securities tainted by the turmoil and into the safety of U.S. government debt.
The Dow plunged 357,36 points, or 4.19 percent, to close at 8,165.99, a new low point in a summer slide that's now dragged the index about 1,100 points, or 12.6 percent, below the July 17 record of 9,337.97. The industrials, once up 18.1 percent this year, is now just up3.3 percent.
The blue-chip index has gone through "a correction" -- which in Wall Street parlance means a decline of 10 percent or more from its high. The S&P 500 and other market indexes already had fallen 10 percent, and the Russell 2000 index of small stocks is down 26 percent from its April record.
"In the U.S., people are hoping for a climactic sell-off to clear the air, but I think it's going to be a long process," said Michael Clark, head of equity trading at Credit Suisse First Boston.
Today's Dow fall was the biggest point drop since Oct. 27, when the index lost 7 percent, spiraling 554.26 to 7,161.15. Even that slide, however, was nowhere near the severity of the 508 point drop of Oct. 19, 1987, when stocks lost a whopping 22.61 percent in a day.
Broader stock indicators also posted huge losses after another day of heavy selling overseas.
In Russia, where the currency market has been paralyzed, stocks extended yesterday's 14 percent plunge with a 9 percent drop as the government halted dollar sales for the remainder of the week. The Central Bank said it needs to save its currency reserves for key imports and other urgent needs, rather than spending them to prop up the ruble.
In Tokyo, meanwhile, the Nikkei stock average plunged 3 percent to a six-year low amid concerns about Russia's woes and mounting fears that political bickering will delay measures to end the nation's worst recession in decades and clean up a banking system crippled by bad debt.
European markets, which have greater ties to the Russian economy than the United States, suffered steep losses for a second straight day. Frankfurt's DAX index fell 4.8 percent, London's FT-SE 100 fell 3.2 percent, and the CAC-40 in Paris fell 4.3 percent.
Prices soared on long-term U.S. Treasury bonds, a traditional haven for cash in times of uncertainty. Bond yields, a major influence on the interest rates charged on many loans, fell to 5.34 percent on the 30-year Treasury. The yield hasn't been that low since the government began regular sales of the 30-year bonds in 1977.
Decliners beat advancers by a 15-to-2 margin on the New York Stock Exchange, with 377 up, 2,876 down and 315 unchanged. NYSE volume was a scorching 934.66 million shares at the close, vs. 671.85 million yesterday.
The Standard & Poor's 500 slid 41.60, or 3.84 percent, to close at 1,042.59. The index is up 7.44 percent for the year so far. The technology-heavy Nasdaq composite index skidded 81.72, or 4.62 percent, to 1,690.86. It was the second-greatest point loss for the index which now is up 7.39 percent for the year.
The NYSE composite index dropped 20.74, 3.84 percent, to 518.82, and is up 1.49 percent for 1998 so far. The American Stock Exchange composite index lost 24.84 points, or 3.92 percent, to close today at 608.99 and is down 11 percent this year. The Russell 2000 index of smaller companies fell 14.32, or 3.76 percent, to 366.10 and is down 16.23 percent in 1998.
Investors are coming to the realization that even large U.S. stocks "aren't the true safe harbors, and that the U.S. economy may not be immune," said Jeffrey Davis, chief investment strategist at State Street Global Advisors, which oversees $450 billion.
State Street Global is shifting money into high-yielding stocks such as utilities and real estate investment trusts, in anticipation of little overall gain in the market in coming months, Davis said. "I could see another 5 percent out of this market, but I don't see much lower than that," he said.
In Canada, Toronto's benchmark index to its biggest one-day decline in 10 months after the Bank of Canada raised its benchmark interest rate in a failed bid to stem the decline of the dollar. The Toronto Stock Exchange 300 composite index fell 372.80, or 6 percent, to 5799.50, the largest single-day rout since the index plummeted 6.2 percent on Oct. 27, 1997. The index is off 21.7 percent this year.
In currency markets today, the dollar fell to 142.18 yen vs. 144.02 late yesterday in New York trading.