Dow Falls 299 Points; Off 9.1 Percentage Points Since JulyBy Jerry Knight
The Washington Post
Stocks fell sharply Tuesday in the second-busiest trading day ever, capping a string of losses that in just 13 trading days has sent the Dow Jones industrial average tumbling from a record high to its lowest level since March.
Five shares fell for every one that rose on the New York Stock Exchange, where 828 million shares were traded. Traders could not pinpoint a single reason for the decline, with many offering explanations that included new gloom over the Asian crisis, concern over corporate earnings and unease over new twists in the White House scandal.
"The sentiment has turned much more negative as people try to understand all the uncertainties out there," said Stephen M. Dalton, who manages $1 billion worth of stocks for First Capital Group, a Philadelphia-based division of First Union Corp.
But the run-up in the Dow average - especially from mid-June to mid-July, when the Japanese government raised hopes it would begin to grapple with the country's recession - has masked a broader weakness in the overall stock market, analysts said.
Indeed, 11 of the 30 Dow stocks have actually fallen this year, including Boeing Co., down 25 percent, and Hewlett-Packard Co., down 17 percent.
Tuesday, the Nasdaq composite index fell 65.44, the second-biggest point drop after Oct. 27's 115-point plunge, closing at 1,785.66. The S&P 500 fell 40.32, to 1,072.12. With the Dow down 9.1 percent from its high, "we have the making of a correction," proclaimed Jeffrey Applegate, chief investment strategist for Lehman Brothers Inc.
A 10 percent drop in stock prices is usually considered a correction that will be followed by a rebound in the market, but the most pessimistic market watchers warned that this could be the end of Wall Street's three and a half-year winning streak.
Prudential Securities technical analyst Ralph Acampora, a noted bull who has been cheerily optimistic through every twist and turn in the market this year, said Tuesday that he had changed his mind and had become convinced stocks could drop another 10 percent.
Many other analysts rejected that forecast, noting that until Tuesday Acampora was predicting the Dow would hit 10,000 by the end of the year.
Dalton said Tuesday's plunge was like hitting a pothole when you're going 60 miles an hour: "Your stomach lurches, but you're not hurt."