A sizzling economy triggered the deepest inflation fears yet this week, plunging the market to its first close below the psychologically-important 10,000 mark since April, 1999.
According to preliminary numbers, the Dow closed down 230 points to 9862 and the Nasdaq Composite fell 27 points to close at 4590.
This morning the Commerce Department said the economy surged
upward at a 6.9 percent annual rate during the final three months
of 1999, the strongest pace in more than three years. The big
advance was even stronger than the 5.8 percent
fourth-quarter rate the government previously estimated one month
ago.
That news scared an already jittery market that was preparing for two or even three more interest rate hikes from the Federal Reserve this year. Blue chip stocks, which had tumbled all through the week, continued their dive, joined by technology stocks, which had been doing remarkably well until today.
Blue chips suffered as traders continued to favor newer
companies that promise faster profit growth.
"The correction is simply not over yet as we can see by the
continuing pressure on stocks like GE, Coke and Merck," said
Charles Pradilla, chief investment strategist at SG Cowen
Securities. "People are moving out of the Old Economy into the New
Economy."
Leading the Dow lower was IBM, down 4 1/8 at 106 11/16, and 3M,
down 4 1/8 at 86 7/8. Also taking a hit: General Electric, off 3
9/16 at 127 7/16 and Hewlett Packard, down 3 1/8 at 126 3/8.
Fueling this correction has been interest rate fears. The Commerce Department numbers released earlier Friday indicated the kind of grapid growth that has led the Federal Reserve to raise rates
four times since June, and warn that more hikes are on the way. The
industrial stocks have been hurt in particular by fears of higher
rates that would curtail their profits.
Among the big winners of the day were Oracle, up 7 5/8 at 69
9/16, and Commerce One, up 34 7/8 at 213 7/8. The two companies
announced they were combining their Internet business exchanges for
the automakers General Motors, Ford and DaimlerChrysler.
Declining issues outnumbered advancers by a four-to-three margin
today on the New York Stock Exchange, where volume came to 857.30
million shares, down from 906.27 million the same time Thursday.
The Russell 2000 index of small companies, the only key stock
index in positive territory, rose 5.59 to 559.63.
- The Associated Press Contributed to this report.
