Dow Plunges 28 as Investor Fears Trigger Sell-Off

NEW YORK —  A spate of weak corporate earnings reports reawakened concerns about the economy on Tuesday and set off a wave of stock market selling that dropped the Dow Jones industrial average 28.50 points to 1,790.11.

The Dow was off as much as 34.50 points before struggling to regain a portion of its losses in the closing minutes of trading.

Also figuring in the decline were concerns that oil prices have dropped too far and the effect of computer-directed arbitrage trading, analysts said. The continued fall of oil prices penalized the stocks of oil companies and financial institutions; computer and transportation issues were also losers in the session.

“If there were only stability in oil prices, that would help calm fears about the oil companies and lenders,” said Newton D. Zinder, market watcher with the financial house of E. F. Hutton & Co. in New York. “But they keep dropping, and people can only fear the worst.”

Managers of big institutional portfolios wanted to be fully invested in the stock market at the end of the first quarter, he said. “Now, some of them seem be taking a little profit and looking for a possible turn in the market,” he added.

Tuesday’s decline again stirred speculation that after gaining more than 600 points in six months, the market is slowing. “The market seems to be at a juncture point here,” said Michael Metz, an analyst with the brokerage of Oppenheimer & Co. “We’re going to need some positive earnings news or some other bright economic development to drive it forward.”

His personal view, he added, is that the market is beginning a “correction” that may drop the Dow several hundred points.

Other analysts disagreed, noting that the Dow gained more than 53 points last week and that computer-directed trading has made one-day, 20-plus-point moves of the Dow commonplace.

While declining issues outnumbered gainers Tuesday by about 11 to 6 on the New York Stock Exchange, “it would have to be a three-to-one or four-to-one margin to worry me,” said Larry Wachtel, analyst with Prudential Bache Securities.

Volume rose Tuesday to 167.39 million shares from Monday’s 134.4 million shares. Standard & Poor’s 500 index fell 3.76 to 235.1, and the New York Stock Exchange composite index fell 1.85 to 135.86.

Large blocks of 10,000 or more shares traded on the NYSE totaled 3,210, compared to 2,369 on Monday.

Bonds Mostly Lower

Government bond prices finished mostly lower after giving back substantial early gains during a wild session, the Associated Press reported.FD

The bellwether 30-year Treasury bond took wide swings. At one point, the yield slid to 7.25% before closing at 7.46%, up slightly from 7.44% late Monday. The price of the benchmark long-term bond, up in the early going nearly 3 points, or $30 for each $1,000 in face amount, ended the day off about 1/8 point. Bond prices and interest rates move in opposite directions.

In the secondary market for U.S. Treasury securities, prices of short-term governments were unchanged to off by 3/32 point, and intermediate maturities lost from 5/32 point to point. A key 20-year bond was unchanged, according to the investment firm of Salomon Bros.

In corporate trading, utilities edged up about 5/8 point in light trading, and industrials were unchanged in moderate activity.

Among tax-exempt municipal bonds, general obligations were unchanged and dollar bonds finished off 1/2 point in moderate activity.

Yields on three-month Treasury bills were down three basis points to 6.30%.

A basis point is one-hundredth of a percentage point. Six-month bills rose three basis points to 6.31%, and one-year bills dipped two basis points to 6.27%.

The federal funds rate, the interest on overnight loans between banks, traded at 7.4375% late in the day, compared to 7.75% late Monday.