NEW YORK (CNNfn) - Severe disappointment with the size of a modest Federal Reserve interest-rate cut drove U.S. stocks into a steep selling spiral Wednesday.
Shortly before 1:30 p.m. the Dow Jones industrial average was down 193.36 points, or 2.4 percent, at 7,887.16. Market breadth on the New York Stock exchange was heavily negative, with losers leading gainers 2,120 to 818 as 439 million shares changed hands.
The Nasdaq Composite fell 46.60, or 2.7 percent, to 1,687.45 and the S&P 500 index lost 26.96, or 2.7 percent, to 1,022.06. (Click here for a look at today's CNNfn market movers.)
Stock markets in Asia and Europe fell, as did emerging markets in Latin America, in selling triggered by a smaller-than-hoped-for Fed rate cut. On Tuesday the U.S. central bank eased the federal funds rate, the most important short-term interest rate it controls, by 1/4 of a percentage point to 5.25 percent.
The move, intended to calm financial markets and limit damage to the U.S. economy from the simmering global economic rout, did little to soothe nervous market players, who had hoped to see more decisive action by the Fed in the form of a 1/2 percentage point cut
Shortly after news of the cut reached the market, Wall Street experts began speculating that another easing could be just around the corner. The Fed will hold its next policy meeting Nov. 29.
Meanwhile, Wall Street's early losses worsened, following an International Monetary Fund recommendation for lower interest rates in the world's richest countries.
The bond market soared, finding strength in the world's stock-market malaise, with the yield on the benchmark 30-year Treasury bond falling to record low levels. The bond rallied 1-19/32 points in price, for a yield of 5.0 percent. Earlier, the yield on the bond fell to 4.99 percent, dipping below 5.0 percent for the first time in the bond's 21-year history.
The dollar strengthened against the Japanese yen as Tokyo's financial problems once again loomed large. The greenback eased slightly against the German mark.
It's profit-warning season again
In the stock market, the overall negative tone was made heavier by a new round of profit warnings from a variety of companies.
Shares of RJR Nabisco (RN) fell 1-3/4 to 25. Late Tuesday the tobacco and food giant warned investors third-quarter earnings will fall 20 to 23 percent below expectations, largely due to poor sales in Russia and neighboring countries.
Fellow tobacco conglomerate and Dow component Philip Morris (MO) shed 1/2 to 46-1/2 in sympathy.
Other losers included energy concern Unocal (UCL), which said its earnings would only be at the low end of expectations, blaming soft oil prices, rough weather, and increased expenses. The stock dropped 15/16 to 35-13/16.
And shares of office-equipment maker Xerox (XRX) shed 2-15/16 to 84-9/16 after Morgan Stanley Dean Witter lowered its 1999 earnings estimates for the company and cut its 9-to-12-month stock price target to 105 from 130.
Elsewhere, banking and financial services stocks were pounded heavily by sellers, also amid disappointment over the Fed's lukewarm rate cut.
Citicorp (CCI) lost 4-3/8 to 93-3/8, Chase Manhattan (CMB) fell 2-3/16 to 42-13/16 and NationsBank (NB) shed 2 to 53-9-1/16. Many large banks followed the federal funds rate decline by easing their prime rates, which they charge on loans to their largest customers.
Among the Dow components, American Express (AXP) was down 4-11/16 to 76-3/16, J.P. Morgan (JPM) dropped 2 to 86-1/16 and Travelers (TRV) lost 1-11/16 to 37-1/2.
Airline shares also felt heavy after several downgrades among the industry's heavyweights. Shares of American Airlines parent AMR (AMR) lost 4-5/16 to 54-3/4 after Donaldson, Lufkin & Jenrette lowered its rating of the company to "market perform" from "buy." And US Airways (U) lost 4-3/16 to 51-9/16 after the same brokerage downgraded the stock to "buy" from a "top pick." Delta Air Lines (DAL) dropped 5-15/16 to 98-3/8 and United Airlines parent UAL (UAL) shed 2-11/16 to 65. The Dow transports index plunged 103.27 points, or 3.8 percent, to 2,642.86. 
-- by staff writer Malina Poshtova Zang
|
