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Interest rate
jitters send
stocks plunging
The Dow sinks 244 and
Associated Press
the Nasdaq tumbles 139NEW YORK -- Stocks plunged today as optimism about corporate earnings gave way to jitters about rising interest rates and their impact on profit growth.
The Dow Jones industrial average fell 243.54 to close at 11,008.17, its steepest loss since Jan. 4, when it lost 359 points.
Broader stock indicators also fell in a volatile session. The Nasdaq composite index plummeted 139.32 points to 4,096.08, its worst loss since Jan. 5, when it lost 150 points.
The Standard & Poor's 500 index fell 39.45 to 1,401.91.
Decliners outnumbered advancers by a 2-to-1 margin on the New York Stock Exchange, with 2,053 down, 1,037 up and 450 unchanged. NYSE volume totaled 1.10 billion shares compared with 1.21 billion on Friday. The Russell 2000 index of smaller companies fell for the first time since Jan. 12, losing 10.99 to 522.95. The NYSE composite index fell 14.34 to 625.24 and the American Stock Exchange composite index dropped 6.79 to 905.49.
The benchmark 30-year bond rose , or $5.31 per $1,000 face amount to a price of 93, after rising on Friday. Its yield fell 5 basis points to 6.64 percent and is down 14 basis points from a 2-year high reached last week.
After a strong opening, stocks collapsed at midday as investors looked ahead to the next meeting of the Federal Reserve on Feb. 1 and 2. Many on Wall Street now fear that an interest rate increase at that meeting will be the first of several this year as the central bank works to stave off inflation.
In 1999, the Fed raised interest rates three times, hoping to keep inflation under control. While most economists see few hints of inflation, continued signs of economic strength have convinced some economists that inflation could escalate at any time.
Today, Federal Reserve Bank of Atlanta President Jack Guynn acknowledged that last year's rate increases had little effect on economic growth. "There is no broad-scale evidence to show that those three increases have done anything to dampen consumer demand," he said, although he noted that it takes several months to see the full impact of rate increases.
Guynn's comments unnerved investors a day before Fed Chairman Alan Greenspan's planned testimony before a Senate committee about the federal budget. While his comments are not expected to specifically address interest rates, Fed watchers will carefully monitor his comments for any signs of the Fed's course, analysts said.
"It's become a foregone conclusion that interest rates are on the rise, and no matter how much, that hurts investors' psyche," said Arthur Hogan, chief market analyst at Jefferies & Co.
The broadness and the depth of today's sell-off suggested that other factors were at hand.
Traders said some investors sold stocks to collect profits from a solid rise in the Nasdaq last week.
High-tech leaders like Cisco Systems Inc. and Sun Microsystems Inc. fell. Cisco Systems tumbled $6.19 to $109.06 and Sun Microsystems sank $5.31 to $79.12.
Procter & Gamble Co. edged up 19 cents to $102.87 after calling off talks to acquire drug makers Warner-Lambert Co. and American Home Products Corp. Procter & Gamble's share price had tumbled 17 percent since rumors of a deal first emerged last week, as many shareholders believed the company would have to issue significant amounts of new stock to pay for the deal.