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U.S. stocks take a hit
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October 15, 1999: 1:44 p.m. ET
Sudden spike in wholesale inflation, Greenspan warning weigh on the market
By Staff Writer Malina Poshtova Zang
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NEW YORK (CNNfn) - U.S. stock markets remained sharply lower in afternoon trading Friday, although off their weakest levels for the day, pressured by a sudden pickup in wholesale inflation and a surprisingly hawkish warning about a possible market sell-off from Federal Reserve Chairman Alan Greenspan.
Shortly before 1:30 p.m. ET, the Dow Jones industrial average was down 148.17 points, or 1.4 percent, to 10,138.44, recovering from a loss of more than 240 points earlier in the day.
Market breadth on the New York Stock Exchange remained severely negative, with declines smothering advances by 2,250 to 711 on heavy trading volume of 536 million shares.
The Nasdaq composite index, which fell more than 3 percent in the morning, regained some ground and was 47.73 points, or 1.6 percent, lower at 2,759.11. The S&P 500 index dropped 19.98 points, or 1.5 percent, to 1,263.44. (Click here for a look at today's CNNfn hot stocks.)
Wall Street's worst fears -- that rising inflation could bring higher interest rates and that the market could face a severe correction -- both were fueled Friday, after Greenspan late Thursday told banks to stash reserves in case they have to face a big market downturn.
The damage was compounded early Friday morning when the Producer Price Index, the main indicator of inflation on the wholesale level, posted its largest increase in nine years in September.
The PPI gained 1.1 percent overall last month, while its core rate, which excludes food and energy components, rose 0.8 percent. In August, the PPI rose 0.5 percent.
But "double witching," a situation when stock index futures and options expire simultaneously, added volatility to trading and lent some help to pull the stock market off its lows.
Prices in the bond market initially fell -- and yields rose -- after the surprise spike in producer prices led investors to speculate that inflation pressure may be picking up faster than previously suspected. Greenspan's stern warning added weight on the market.
But the stock market's sharp sell-off led some market participants to seek a safe haven in government debt, leaving the bellwether 30-year Treasury bond up 3/32 of a point in price, its yield at 6.31 percent, down slightly from Thursday's 6.32 percent -- which was the highest the bond's yield has been in almost two years.
The bearish combination of rising producer inflation and a hawkish comment from Greenspan also weighed on the dollar, leaving the currency sharply lower against both the yen and the euro.
Rate sensitive stocks take a hit
Wall Street's two most interest rate-sensitive sectors -- banking and technology -- were among the hardest hit in the broad sell-off that struck the market.
Banks' lending business would slow down and a potential increase in debt defaults could hurt profitability if interest rates rose. At the same time, high-tech companies would have to curb their usually heavy borrowing, which they rely on to support their fast growth rates.
Among the leading financial stocks, American Express (AXP) shed 5 to 137, Citigroup (C) fell 7/8 to 43-1/16 and J.P. Morgan (JPM) dropped 3-1/8 to 107-3/4. All three are Dow components.
Meanwhile, some leading technology stocks managed to recover from their initial tumble. Among the high-tech blue chips, Dow member IBM (IBM) crawled back to trade 1/16 higher at 107-1/16, while Hewlett Packard (HWP), also one of the 30 industrials, was up 9/16 to 82-9/16.
On the Nasdaq, Microsoft (MSFT) was 1-15/16 lower at 88-3/4, Intel (INTC) fell 15/32 to 72-7/8, Dell (DELL) lost 1-9/32 to 43-1/16 and Cisco Systems (CSCO) retreated 1 to 68-3/8.
Earnings also in focus
Investors also punished stocks of companies that reported their latest earnings -- even when those results were better than expected.
Among those punished, Internet advertiser DoubleClick (DCLK) tumbled 11-1/4, or nearly 9 percent, to 116-1/4, after the company reported a third-quarter loss that was slightly smaller than expected.
But better-than-expected fiscal first-quarter earnings at Sun Microsystems (SUNW) rescued that company's stock, which rallied 5-9/32 to 94-11/16.
And retailer Office Depot (ODP) saw its shares rise 1-13/16 to 10-15/16, a gain of nearly 20 percent, after the company reported stronger-than-expected third-quarter results.
Finally, shares of Dow component Caterpillar (CAT) inched up 1/16 to 55-11/16 after the construction equipment maker reported stronger-than-forecast third-quarter profit, but said revenue for the full year would fall short of expectations. 
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