DOW DROPS 140.11 POINTS : SIGNS OF STRONG ECONOMY HAVE WALL STREET SELLING IN FEAR OF INFLATION.Byline: David Barboza The New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times Stocks were rocked Thursday after reports showed that the economy could be accelerating too fast, raising fears that inflation could derail de·rail intr. & tr.v. de·railed, de·rail·ing, de·rails 1. To run or cause to run off the rails. 2. the seven-year-long bull market. Falling bond prices and a sell-off in futures of the Standard & Poor's 500 index set off a wave of blue-chip selling late in the afternoon, in what at one point looked like a panic. The Dow Jones industrial average Dow Jones Industrial Average The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. fell as many as 216 points in the last half hour of trading before recovering to end the day down 140.11 points, or 2.04 percent, at 6,740.59. The plunge came after bond prices fell more than a point, pushing the yield on the 30-year Treasury bond - a benchmark for corporate and consumer interest rates - above the psychologically important level of 7 percent. Bond prices and their yields move in opposite directions. ``The economy is hotter than people thought, and the bond market is recognizing that,'' said David Shulman David Shulman (November 12, 1912–October 30, 2004) was an American lexicographer and cryptographer. He contributed many early usages to the Oxford English Dictionary and is listed among "Readers and contributors from collections" for the second edition of the OED , chief equity strategist at Salomon Brothers
Salomon Brothers was a Wall Street investment bank. . ``Right now, there's more of an inflationary risk Inflationary Risk The uncertainty over the future real value (after inflation) of your investment. Notes: This is the risk that inflation will undermine the performance of your investment. than people previously thought.'' If a strong pickup in inflation is indeed on the horizon, Federal Reserve policy makers - who voted earlier this week to raise short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. a quarter point - may feel compelled to push rates higher. Such a move to slow the economy, analysts fear, would increase lending costs, cutting into corporate profits - and stalling the bull market. The new economic data that jolted the stock and bond markets on Thursday included reports that home resales jumped 9 percent in February and that the number of first-time claims for unemployment benefits dropped unexpectedly. And a study conducted by the University of Michigan (body, education) University of Michigan - A large cosmopolitan university in the Midwest USA. Over 50000 students are enrolled at the University of Michigan's three campuses. The students come from 50 states and over 100 foreign countries. showed consumer confidence picking up. These signs of growth, coming just days after the Federal Reserve voted to raise rates, were troubling for the bond market. The yield on the 30-year bond rose to 7.08 percent from 6.98 percent on Wednesday - its highest level since Sept. 11. Many analysts say that investors begin to see bonds as more attractive than stocks when bond yields rise above 7 percent. ``It's tough to beat 7 percent when the stock market is, as many of us believe, overvalued Overvalued A stock whose current price is not justified by the earnings outlook or price/earnings (P/E) ratio and thus, expected to drop in price. Overvaluation may result from an emotional buying spurt, which inflates the market price of the stock or from a deterioration in a ,'' said Hugh Johnson Hugh Johnson may refer to:
For the Dow, Thursday was the eighth largest point loss in history, but in percentage terms, it did not even rank in the top 25. And the Dow fell 160.48 points less than two weeks ago, on March 13, after the yield on the 30-year bond shot up to 6.95 percent from 6.88 percent. And Thursday's tumble came on relatively light trading. About 476.8 million shares were traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. heading into a holiday weekend. The market will be closed on Friday in observance of Good Friday Good Friday, anniversary of Jesus' death on the cross. According to the Gospels, Jesus was put to death on the Friday before Easter Day. Since the early church Good Friday has been observed by fasting and penance. . Still, it was the lowest close for the Dow since Jan. 24, and about 345 points, or about 5 percent, below its record close of 7,085.16 on March 11. At one point, late in the day, a wave of program selling and a futures sell-off pushed the market down and the drop looked as if it might accelerate into one of the biggest point declines in Dow history. At 3:40 p.m., the Dow was down 216 points - or 3.1 percent. The only time the Dow has ever lost more than 200 points was on Oct. 19, 1987. That day the Dow - which is the most widely followed index - plunged 508 points, or 22.61 percent. According to Birinyi Associates, a market research firm in Greenwich, Conn., there were seven large program trades on Thursday - block trade sell-offs that took more than 193 points off the Dow. The largest, which came at 3:27 p.m., trimmed about 72 points. On stock market monitors around the world, the final hour of the Dow looked like a giant V, first plunging and then bouncing back 76 points. The one ``buy'' program recorded on Thursday by Birinyi Associates was a last hour gain of 55 points on the Dow. DOW JONES' BIGGEST POINT LOSSES The Dow Jones industrial average had its eighth-worst point drop Thursday. That wasn't even close to the largest percentage drops, however. Date Point Loss Close %Change Oct. 19, 1987: 508.00 1,738.74 22.6 Oct. 13, 1989: 190.58 2,569.26 6.9 March 8, 1996: 171.24 5,470.45 3.0 July 15, 1996: 161.05 5,349.51 2.9 March 13, 1997: 160.48 6,878.89 2.3 Oct. 26, 1987: 156.83 1,793.93 8.0 Jan. 8, 1988: 140.58 1,911.31 6.9 March 27, 1997: 140.11 6,740.59 2.0 Nov. 15, 1991: 120.31 2,943.20 3.9 July 5, 1996: 114.88 5,588.14 2.0 CAPTION(S): Chart Chart: DOW JONES' BIGGEST POINT LOSSES (See text) |
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