Star-Bulletin news services
Dow closes below 10,000
as rate fears drive selling
NEW YORK >> Interest rate fears drove a major selloff on Wall Street yesterday, with the Dow Jones industrial average closing below 10,000 for the first time since Dec. 10 and all three major indexes dropping to their lows for the year.
The dread that has sent stocks tumbling over the past four weeks intensified in response to Friday's employment report from the Labor Department that the U.S. gained 288,000 new jobs in April. Investors feared the news would prompt the Federal Reserve to raise rates as early as next month, and selling spread around the globe Monday before sending Wall Street skidding as well.
"Of course, psychologically, Dow 10,000 has some short-term effects on the market," said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. "Long-term, the markets still look at corporate fundamentals, earnings, that sort of thing. But we do have some inflation and interest rate fears in play which could keep things lower, at least for now."
Declining issues outnumbered advancers by about 8 to 1 on the NYSE, where consolidated volume came to 2.37 billion shares, compared to 2 billion on Friday.
The Dow fell 127.32, or 1.3 percent, to 9,990.02 in heavy volume on the New York Stock Exchange and Nasdaq Stock Market. At one point, the Dow was down 183.11.
Broader stock indicators were also sharply lower. The Standard & Poor's 500 index was down 11.58, or 1 percent, at 1,087.12. The Nasdaq composite index dropped 21.89, or 1.1 percent, to 1,896.07. The Russell 2000 index of smaller companies dropped 10.70, or 2 percent, to 537.86.
Since Wednesday's close, all four indexes have fallen sharply. The Dow, S&P and Nasdaq have each fallen 3.1 percent, the Russell has lost 5.7 percent.
The price of the Treasury's 10-year note closed down 1/8 point, while its yield rose to 4.79 percent from 4.77 percent Friday. Two-year Treasury notes rose 1/16 point and yielded 2.59 percent, down from 2.60 percent Friday.
Wall Street has been gripped by a spasm of selling for four weeks as economic indicators grew more positive and investors worried that corporate profits would be eroded by an ensuing series of interest rate hikes. Along the way, the market completely ignored a stellar batch of first-quarter earnings reports.
"Investors do have some incentive to lock in gains," Freeman said. "Stocks have done very, very well over the past 12 months, and this could be as good as it gets for the next few months. And you're seeing a lot of rotation into traditionally defensive sectors such as healthcare and consumer staples."
Indeed, investors sent healthcare giant Johnson & Johnson up 15 cents at $55.45, while retailer Wal-Mart Stores Inc. rose $1.32 to $55.22.
A number of industry bellwethers, including Dell Inc., Wal-Mart and Cisco Systems Inc., are expected to release earnings later this week.
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