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Dow dives 295
on rate jitters

The index suffers its worst loss
this year and the Nasdaq sinks 137
despite benign inflation data

Bloomberg News

NEW YORK -- Stocks tumbled today, sending the Dow Jones industrial average and Standard & Poor's 500 index to their biggest losses in six weeks, on concern interest rates will rise more than expected, cutting into corporate profit.

The Dow dropped 295.05, or 2.8 percent, to close at 10,219.52, and the S&P 500 declined 42.16, or 3 percent, to 1,346.09, their biggest losses since Jan. 4.

The technology-heavy Nasdaq composite index retreated from yesterday's record, falling 137.18, or 3 percent, to 4,411.74.

Today was the ninth straight time stocks fell the Friday before the three-day Presidents Day weekend. U.S. markets are closed Monday for the holiday.

More than three stocks fell for every one that rose on the New York Stock Exchange, with 2,229 down, 704 up and 461 unchanged. NYSE volume totaled 1.03 billion shares vs. yesterday's 1.03 billion. About 1.9 billion shares traded on the Nasdaq Stock Market, according to preliminary figures, the fifth-most ever.

For the week the Dow lost 4 percent, the S&P 500 5 percent and the Nasdaq 1.6 percent. For the year to date, the Dow is off 11 percent, while the S&P 500 and Nasdaq are more than 8 percent lower.

The NYSE composite index lost 14.59 today to close at 586.67. The American Stock Exchange composite index dropped 5.50 to 931.96 and the Russell 2000 index sank 12.75 points to 545.67.

Financial companies including American Express Co. and computer-related companies such as Intel Corp. dropped after Federal Reserve Chairman Alan Greenspan warned that rates may have to continue rising to cool the economy. Novell Inc. and Global Crossing Ltd. were among the biggest decliners after reporting results that disappointed investors.

"Why would stocks be up? The stocks that have driven the market are selling for ridiculous prices, and Greenspan has indicated interest rates will increase ad infinitum," said Bill Meehan, analyst at Cantor Fitzgerald & Co.

The 30-year Treasury bond's price rose 26/32 point, or $8.13 per $1,000 face amount; its yield fell 6 basis points to 6.16 percent. Ten-year bond yields dropped 8 basis points to 6.49 percent. Two-year yields fell 4 basis points to 6.63 percent. At 6.16 percent, the 30-year bond yield is now 47 basis points below that of 2-year notes, the widest gap in almost 11 years.

Stocks dropped despite a government report showing consumer prices rose less than expected in January.

The report evidently did not change investors' belief that the Fed will raise rates more than once in coming months as it tries to keep inflation in check. The losses accelerated as speculators sold shares to avoid owning stocks over the three-day weekend.

Today's decline "is a delayed reaction to Greenspan's comments from yesterday," said Peter Coolidge, head of equity trading at Brean Murray & Co. "Investors are starting to take to heart that interest rates are going higher and that's bad for stocks."

Greenspan said in congressional testimony yesterday that the central bank, which has increased rates by a quarter point four times since June, will boost them again to keep inflation in check.