Greenspan fuels
market meltdown

The Dow nose dives 267 points

NEW YORK -- The Dow Jones industrials briefly fell below 10,000 today as news of an inflationary spurt and a warning about market exuberance from Federal Reserve Chairman Alan Greenspan sent stocks tumbling.

The drop below 10,000 lasted only moments, and the Dow fell no further than 9,998.18. But the average still finished 266.90 points, or 2.6 percent lower, at 10,019.71 for its worst close since early April.

The loss yanked the Dow's gain for the year below 10 percent and put the average about 1,300 points, or 11.5 percent, below the Aug. 25 record close of 11,326.04, when the Dow was up more than 23 percent. Wall Street analysts consider a drop of 10 percent or more to be a market "correction." Broader stock indicators also suffered heavy damage today.

The Nasdaq composite index sank 75.01, or 2.7 percent, at 2,731.83, while the Standard & Poor's 500 index fell 36.01, or 2.8 percent, to 1,247.41.

Decliners beat advancers by more than a 3-to-1 margin on the New York Stock Exchange, with 687 up, 2,400 down and 436 unchanged. Nasdaq decliners led by a slightly smaller margin. NYSE volume totaled 907.56 million shares, up from 878.25 million yesterday.

The NYSE composite index fell 15.16 to 576.17; the American Stock Exchange composite dropped 8.95 to 777.00; and the Russell 2000 index of smaller companies fell 4.61 to 414.70.

Financial stocks, which could see demand for loans hurt by rising interest rates, were among the day's biggest decliners with American Express and J.P. Morgan leading the Dow's decline.

Bucking the day's downward trend, Sun Microsystems rallied in Nasdaq trading after the maker of powerful business computers posted better than expected profits.

Overseas markets took a big hit today. In Europe, Britain's FTSE 100 fell 2.2 percent, Germany's DAX index fell 0.7 percent percent and France's CAC-40 fell 1.3 percent. Japan's Nikkei stock average fell 1.0 percent.

The 30-year U.S. Treasury bond price rose 25/32, or $7.81 per $1,000 face amount; its yield fell 6 basis points to 6.26 percent after reaching a two-year high of 6.33 percent yesterday.

The stock selloff followed a morning report that revealed prices at the wholesale level spiked 1.1 percent in September, the largest increase in nine years.

The increase in the Producer Price Index, which measures inflation pressures before they reach the consumer, was much worse than expected. Many analysts were anticipating that prices would rise 0.5 percent last month.

Meanwhile, in a speech to bankers Thursday night, Greenspan issued his latest call for investor sobriety at a time of robust economic expansion and roaring stock markets.

Both developments aggravated market fears that the Federal Reserve will raise interest rates for the third time this year in a bid to fight inflation by slowing the economy.

This afternoon, in a speech on the Year 2000 computer bug, Greenspan made no mention of today's inflation report or the overall financial backdrop. Fed policy makers hold their next meeting Nov. 16.