Fears over mounting tensions in Kosovo, coupled with concerns over weakening corporate profits, sent the Dow Jones industrial average diving more than 200 points yesterday.
The closely watched Dow was also pushed down by sellers who wanted to take profits, days after the index nearly closed above the 10,000-point mark for the first time.
The Dow, which is made up of 30 big-company stocks, fell 218.68 points, or 2.21 percent, to 9,671.83. The index is down 325.79 points, or 3.3 percent, since it closed at a high of 9,997.62 Thursday.
AT&T; Corp., which gained 12.5 cents, to $77.50, was the only Dow stock to rise yesterday.
"There is a lot of nervousness around and a number of complex crosscurrents," said Alan Ackerman, market strategist in New York at the brokerage Fahnestock & Co.
"Kosovo is a really serious situation," said Angel Mata Jr., head of listed equity trading at Baltimore-based Legg Mason Wood Walker Inc. "It concerns the market a little bit."
The Standard & Poor's 500 stock index, which gives a broad measure of the market, fell 34.87 points, or 2.69 percent, to 1,262.14. Eighty-seven of the 89 industry groups in that index declined.
The Nasdaq composite index, which is dominated by large technology companies, plunged 73.10 points, or 3.05 percent, to 2,322.84. The Nasdaq's decline was equivalent to a loss of more than 300 points on the Dow.
Elsewhere on the broad market, the Russell 2,000 index, a benchmark of small-cap stocks, dropped 9.83, to 383.37; the Wilshire 5,000 index plunged 312.48, to 11,449.19; the American Stock Exchange composite index sank 14.04, to 703.32; and the S&P; 400 midcap index skidded 7.66, to 353.14.
The Sun-Bloomberg Maryland index of the top 100 Maryland stocks lost 4.86, to 176.49.
Seven stocks fell for every two that rose on the New York Stock Exchange, the broadest drop since Oct. 8, in trading of about 819 million shares.
The stock market was also rattled by an announcement that gasoline prices are rising, increasing fears that inflation could creep higher, experts said.
The U.S. Department of Energy said the average pump price for regular gasoline was $1.017 per gallon, up 4 cents from 0.997 cents last week. The average price has risen 11 cents since reaching a low of 90.7 cents a gallon Feb. 22.
In addition, analysts at Merrill Lynch & Co. reduced their first-quarter earnings estimates for Coca-Cola Co., a bellwether stock, because demand for its products in Japan and Latin America appears to be weakening. Shares of Coca-Cola fell $1.8125, to $65.875.
It was not the only blue chip to fall yesterday. Shares of Microsoft Corp. fell $6.25, to $166.5625, and those of General Motors Corp., the largest U.S. automaker, slipped $4.6875, to $85.5625.
"The ingredients for some kind of down draft in the market were in place," said Patrick Bradley, director of economic and investment research at Baltimore-based Mercantile-Safe Deposit & Trust Co. "I think high expectations for the market may have got smacked a little bit."
Mata attributed the decline in some of the big-company stocks to investors selling to take profits. "Now we are seeing some of the good stocks get hit; we are not seeing any of the buying on the weakness here," he said.
Despite the jolts over the past several days, analysts expect stocks to rise and the Dow to soon break 10,000 points.
"I don't really see it as a big correction that is starting here, so much as a resting point," said David Straus, senior portfolio manager at Washington-based J. L. Capital Management Inc., which manages $45 million in capital. "You just had an awfully fast run-up here."
Bradley said the pieces are in place to keep the market moving higher, which include low interest rates, low inflation and low unemployment, as well as a strengthening manufacturing sector.
"Have the positive fundamental factors changed and has the Fed [Federal Reserve Board] all of a sudden tightened monetary policy? I don't think so," Bradley said. "The fundamental factors that drive share prices still suggest that the equity prices move higher. There is just too much money out there."
Dell Computer Corp., the most active issue with nearly 61 million shares traded, slid $2.1875, to $35.6875, on concern that the biggest direct-seller of personal computers faces another quarter of slowing sales growth.
Pathogenesis Corp. became the latest example of a company whose warning of a shortfall in earnings caused the stock to plummet. Pathogenesis warned yesterday that it expects to post a loss this year on weaker-than-expected sales of its sole drug product, an inhaled antibiotic, and its shares got walloped, plunging $22.5625, nearly 65 percent, to $12.1875. It was the biggest loser in U.S. trading.
America Online Inc. dropped $9, to $121, after rising 46 percent since the beginning of the month. AOL trades at 350 times estimated 1999 earnings per share.
TheStreet.com's index of Internet stocks fell 5.8 percent.
Charles Schwab Corp. fell $4.125, to $85; Merrill Lynch & Co. sank $4.25, to $85.6875; Lehman Brothers Holdings Inc. lost $3.375, to $54.8125; and Bear Stearns Cos. skidded $3.125, to $43.625.
Pillowtex, which makes Fieldcrest linens and towels, dropped $4.875, to $12.625, after it said it expects first-quarter earnings of 40 cents a share, less than analysts' 60-cent average estimate.
3Com, down 62.5 cents, to $23.625, reported earnings after the market closed, beating lowered earnings estimates by a penny. The stock rose to $24.0625 in trading after the exchange closed. Micron Technology Inc., which fell $2.375, to $50.625, is to report today. Both companies warned recently that their earnings would not meet analysts' expectations.
GM's decline of $4.6875 contributed most to the Dow average's decline, while Ford Motor Co. fell $2.375, to $56.875. The automakers were pulled down by a decline in DaimlerChrysler AG shares, which in turn were hurt by an overall drop in German stocks, said Nick Colas, an analyst with CS First Boston.
Bank of New York Co. lost $1.25, to $36.9375, after the world's largest processor of stock and bond transactions for pension funds agreed to buy Scotland's largest bank, Royal Bank of Scotland PLC's trust bank, and an investor services business for an undisclosed price to expand its international business.
With this purchase, Bank of New York would be the largest global custodian, managing $5.9 trillion in assets.
BellSouth Corp. fell $2.8125, to $42.75, after the No. 4 U.S. local phone company said it expects first-quarter profit to be at the "lower end" of expectations.
Bloomberg News contributed to this article.
Pub Date: 3/24/99