Failure of Budget Talks Takes Toll; Dow Slumps 43.77

NEW YORK â€”  Stocks slumped Thursday in what market analysts called a show of exasperation with the failure of Washington negotiators to agree on a budget deficit reduction one day before automatic cuts take effect.

The Dow Jones industrial average dropped 43.77 to 1,895.39, putting the widely watched indicator under the 1,900 level for the first time in a week. Broader market barometers also declined sharply.

The average has risen since the October crash, partly on hopes that the United States would cut its gaping budget shortfall to support the dollar and ease interest rate pressures.

But in the fourth week of the talks with no pact, despair was growing, even as the White House expressed confidence that an agreement was imminent. Negotiators failed Thursday night to finish work on a deficit-reduction package and agreed to meet again today.

The bickering between the White House and Congress on an issue that played a role in the Oct. 19 stock crash has dismayed investors and convinced some that any deficit-reduction package would be superficial, analysts said.

The crisis led to new resolve in Washington to cut the budget deficit by at least $30 billion before $23 billion in automatic cuts that are expected to take effect today, at least temporarily, under the Gramm-Rudman law. But the persistent stalling and lack of visible progress made many Wall Street analysts cynical.

“I think the market is showing a high degree of disgust with the inability of the budget negotiators to come up with anything after 3 1/2 weeks of effort,� said Alfred Goldman, a market strategist at A. G. Edwards & Sons, a St. Louis-based investment firm. “It looks like they couldn’t even rearrange the deck chairs on the Titanic.�

“Rigor mortis has seized budget talks in Washington,� said Ralph Bloch, chief technical analyst with Raymond, James & Associates. “It’s disgraceful no agreement on cutting the budget can be reached.�

Volume on the New York Stock Exchange totaled a relatively light 157.14 million shares, an indication that many investors were simply waiting for a deficit-reduction pact before they decided their next move. Wednesday’s volume also was light at 158.27 million shares.

Market attention has been fixed on the deficit talks because they are considered a crucial indicator of the U.S. government’s resolve to stop spending beyond its means.

Oil Stocks Down

In composite trading on the New York Stock Exchange, losing issues outnumbered decliners by more than 3 to 1, with 1,287 down, 366 up and 337 unchanged.

The NYSE composite index of all its listed issues fell 2.86 to 134.72. The American Stock Exchange index dropped 5.09 to 241.76.

The Wilshire index of 5,000 equities closed at 2,340.067, down 47.522 from Wednesday’s close.

Among the most actively traded blue chips, IBM dropped 2 3/4 to 115 5/8; Sears Roebuck slipped 1 to 35 5/8; General Electric retreated 1 1/8 to 44 3/8, and Minnesota Mining fell 2 3/8 to 61 1/2.

Oil stocks declined sharply because of the uncertain outlook for prices and pessimism expressed by some petroleum industry analysts. Mobil fell 1 7/8 to 34 7/8; Amoco slipped 1 1/2 to 66; Atlantic Richfield yielded 2 to 70 3/8, and Schlumberger dropped 2 3/4 to 30.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 181.82 million shares.

Standard & Poor’s index of 400 industrials fell 6.85 to 274.30, and S&P;’s 500-stock composite index fell 5.50 to 240.05.

The NASDAQ index closed at 313.93, off 4.29. Stock prices in London and Tokyo fell in quiet trading Thursday, pressured by pessimism about the U.S. budget deficit.

In London, the Financial Times-Stock Exchange 100-stock index fell 24.6 to close at 1,639.1.