NEW YORK (AP) — Stocks fell sharply Thursday as money managers, just days away from the close of a brutal quarter, made sure to protect some of Wednesday’s big gains.
The Dow Jones industrial average finished 152.42 lower at 8,001.99 after nearly surrendering all of Wednesday’s 257-point surge with an afternoon slide of 218. Broader stock indicators also suffered heavy losses.
“A little game of give-back, that’s what I’m calling it. The market got way ahead of itself (on Wednesday),” said Brian Belski, a market analyst at Dougherty Summit Securities in Minneapolis. “Today reaffirms that there’s still a heck of a lot of doubt out there.”
The Dow has lost nearly 1,000 points in the quarter that ends next Wednesday despite setting new highs as the three-month period began in July. A rapid retreat from the July 17 peak of 9,337.97 has suddenly reduced this year’s gain from 18.1 percent to just 1.2 percent, or less than 100 points.
On Wednesday, the Dow rose to its highest level in a month as Federal Reserve Chairman Alan Greenspan, in a rare burst of conversational clarity, signaled that the central bank will lower interest rates to combat a widening economic crisis overseas.
Greenspan said no decision would be made until Tuesday’s Fed policy meeting, but assured a Senate panel that, “I think we know where we have to go” in trying to contain the financial turmoil, which has spread from Asia to Russia, and is now threatening Latin America.
While the debate has largely shifted from when the Fed might cut rates to how much, “the lack of a defining date is causing some people to rethink what happened yesterday and take some (money) off the table,” said Belski.
Predictably, Thursday’s big decliners included some of Wednesday’s big gainers. Among the Dow 30, J.P. Morgan fell 5 15/16 to 87 3/16, Travelers Group fell 2 9/16 to 40], and General Electric fell 2 5/16 to 81}. Likewise, Microsoft fell 3 7/16 to 110 3/16 to lead the Nasdaq market lower.
The prospect of an economic booster shot from the Fed energized stocks Thursday in Japan, where the battered Nikkei stock average jumped 3.0 percent. In addition to fueling domestic borrowing and spending, lower U.S. rates would help ensure that the United States continues to serve as an economic engine for the rest of the world.