NEW YORK -- U.S. stocks posted their broadest decline in two months yesterday on concern that the Federal Reserve will forgo another interest rate cut.
Shares of financial companies dropped and U.S. bonds took their biggest losses since May 1994 after Fed Chairman Alan Greenspan hinted that the central bank might not need to trim borrowing rates soon. Investors had hoped that another cut would revive corporate profit growth and prolong the 14-month rally in stocks.
The Dow Jones industrial average dropped 44.79 to 5,458.53 as Merck & Co., J. P. Morgan & Co. and Procter & Gamble Co. slumped.
Some 1,960 stocks fell and 536 rose on the New York Stock Exchange, the broadest decline since Dec. 18.
The yield on the benchmark 30-year U.S. Treasury bond soared 16 basis points to 6.40 percent, the highest since Oct. 26.
The Standard & Poor's 500 index skidded 7.33 to 640.65, dragged down by shares of CUC International Inc. and housing companies. The Nasdaq composite index fell 7.47 to 1,083.24, led lower by Amgen Inc., MCI Communications Corp. and Tele-Communications Inc.
Among other indexes, the Russell 2,000 index of small capitalization stocks fell 2.68 to 318.91; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 67.59 to 6,275.69; the American Stock Exchange market value index skidded 3.32 to 558.52; and the S&P; 400 midcap index fell 2.23 to 225.23.
Gold stocks fell as the precious metal's price plunged.
April gold closed $6.40 an ounce lower at $401.10 an ounce. The price breached $400 for the first time since Jan. 18, falling as low as $399.20 an ounce.
Barrick Gold Corp. fell 62.5 cents to $30.375; Newmont Mining Corp. slid $1.625 to $54.50; Homestake Mining Co. slipped 50 cents to $18.875 and Placer Dome Inc. dropped 50 cents to $27.375.
Banks, insurers and brokerage houses -- companies whose profits are most sensitive to changes in rates -- paced the declines. The New York Stock Exchange Financials Index dropped 4.62, or 1.5 percent, to 287.42 -- its fourth straight decline.
The Dow Jones utilities average slid 3.99, or 1.7 percent, to 225.75, its lowest level since Dec. 29.
Seagate Technology Inc. announced it planned to buy back up to an additional 2.5 million of its shares, or 2.6 percent of the total outstanding. Seagate added $1.75 to $63.375.
Apple Computer Inc. jumped $1.50 to $29.