The Nasdaq composite index fell to its lowest level in nearly two years Wednesday after an unexpected surge in inflation intensified investors' fears about the future.
The Dow Jones industrial average also plunged more than 200
points in heavy trading after the government reported the biggest
increase in consumer prices in 10 months.
The tech-focused Nasdaq composite index dropped 49.42 to
2,268.93, according to preliminary calculations, its lowest close
since March 3, 1999.
The Dow Jones industrials average closed down 204.30 at
10,526.58, its weakest finish since Jan. 12. The Standard & Poor's
500 index was off 23.66 at 1,255.28, its lowest close in 16 months.
The downturn came on a Labor Department report showing a 0.6
percent gain in its Consumer Price Index for January — chiefly
because of gains in natural gas and electricity prices, which have
since eased.
The numbers caught some market watchers off guard, although many
believe that, at least for now, the data is an aberration rather
than the beginning of a trend.
"In the current circumstances, these numbers are not as big a
deal," said Merrill Lynch chief economist Bruce Steinberg. "The
economy is weak and you just don't get inflation developing in
these circumstances."
But other analysts said the data made already nervous investors even more
reluctant to take strong positions in a market that might not
recover for a while.
"These inflation numbers were something that was not supposed
to happen, and when you're in a tenuous market... investors get
scared," said Barry Hyman, chief investment strategist for
Weatherly Securities. "There's just too many unknowns in front of
the market at this point."
A broad stock selloff intensified late in the day after fluctuating earlier in the
session.
Financials were pulled lower by banker J.P. Morgan Chase, down
$2.60 at $47.35. The Dow fell on losses in its manufacturing
sectors: 3M dropped $1.98 to $111.26 and Boeing lost $1.65 to reach
$60.20.
Technology also weighed down the markets as bargain hunters
pushed the battered sector's stock prices higher only to be
replaced by sellers seeking to preserve their profits.
Oracle fell 13 cents to $23, while Intel, which is also a Dow
component, dropped 44 cents to $31. IBM's $3.17 slip to $108.43
also hurt the Dow.
Utility stocks, which are viewed as safer investment in a weak
economy, fared better. Edison International rose 35 cents to $13.45
and PG&E; was up 7 cents at $13.06.
Health care stocks were also strong, led higher by Merck, up 81
cents at $78.71.
But Wall Street was primarily in a selling mood _ a reflection,
analysts said, of investors' doubt about whether the Federal
Reserve Board is doing enough to stimulate the sluggish economy.
The Fed is expected to cut interest rates for a third time this
year when it meets again next month. But investors are no longer
sure the action will be enough to restart growth.
Declining issues outnumbered advancers 3 to 2 on the New York
Stock Exchange. Volume came to 1.2 billion shares, ahead of the 1.1
billion reported at the same point Tuesday.
The Russell 2000 index dropped 7.63 to 483.51.
Overseas, stocks were weak. Japan's Nikkei stock average fell
1.1 percent. Germany's DAX index was down 1.6 percent, Britain's
FT-SE 100 dropped 0.1 percent, and France's CAC-40 tumbled 1.3
percent.
