Dow Jones plunges more than 366 points

Article published Friday, October 19, 2007
Dow Jones plunges more than 366 points

ASSOCIATED PRESS


NEW YORK — The Dow Jones industrial average
dropped more than 366 points today — the anniversary of the Black
Monday crash 20 year ago — as renewed credit concerns, lackluster
corporate earnings and rising oil prices spooked investors.

The
market turned sharply lower in late afternoon when Standard &
Poor’s again reduced its ratings on residential mortgage-backed
securities. The latest reduction, on more than 1,400 types of
securities, added to investors unease about credit quality.

In
addition, mixed results from Dow components Caterpillar Inc., Honeywell
Inc., and 3M Co. gave investors little incentive to take chances on the
market. And oil prices added to investors’ list of concerns after
briefly moving above the psychological barrier of $90 per barrel for
the first time.

In one bright spot, Google Inc. reported stronger-than-expected profits, drawing a number of analyst upgrades.

“I
was not surprised there was some correction, given our expectation that
earnings growth was going to fall short of expectations,” said Alan
Gayle, senior investment strategist, director of asset allocation for
Trusco Capital Management.

“I think stock analysts were slow to incorporate the impact of the subprime crisis on third-quarter earnings,” he added.

According
to preliminary calculations, the Dow fell 366.94, or 2.64 percent, to
13,522.02. The Dow was down for the fifth straight session.

Broader
stock indicators also fell. The Standard & Poor’s 500 index fell
39.45, or 2.56 percent, to 1,500.63, and the Nasdaq composite index
dropped 74.15, or 2.65 percent, to 2,725.16. The Nasdaq fell below the
noteworthy technical level of 2,750, adding to selling pressure.

Today’s
pullback pales in comparison to what traders on the floor of the New
York Stock Exchange had to contend with 20 years ago. On Oct. 19, 1987
— Black Monday — the Dow plunged 23 percent amid concerns about
interest rates and slowing economic growth. A decline of similar
proportion given the market’s current levels would mean a drop of some
3,000 points.

A decline today in the NYSE composite index proved
steep enough, however, to trigger trading curbs, which puts
restrictions on certain types of sell orders. These protections were
set up in part in response to Black Monday.

Bonds prices rose
again today, extending a rally to an unusual five sessions. The yield
on the benchmark 10-year Treasury note, which moves inversely to the
price, fell to 4.40 percent from 4.50 percent late Thursday. The dollar
was mixed against other major currencies, while gold prices fell.

After
touching $90.07 overnight, light, sweet crude fell 87 cents to settle
at $88.60 on the New York Mercantile Exchange. Prices have spiked due
amid forces such as a weak dollar and thin supplies at a key Midwest
oil terminal.

“Investors are starting to get concerned about
both the pace of the U.S. economy and the pace of earnings growth,”
said Art Hogan, chief market strategist at Jefferies & Co.

“We’ve got a multitude of earnings that are less than optimal in spaces outside the financials,” he said.

Hogan
noted that for much of the week investors focused on results from
banks, which saw profits drop on souring mortgage loans and tight
credit markets. But seeing weakness today in industrial company
earnings reports increased their nervousness.

Caterpillar, one
of the world’s largest construction equipment makers, fell $4.09, or
5.3 percent, to $73.57 after its third-quarter earnings rose 21 percent
but fell short of Wall Street’s expectations. In addition, the company
lowered its full-year forecast.

Honeywell International Inc.,
the diversified manufacturer, turned in a 14 percent increase in its
third-quarter earnings. The company raised its forecast for full-year
earnings to the high end of its previously targeted range. An analyst,
however, described profit margins at the company’s transportation and
automation and controls segments as disappointing. The stock declined
$2.37, or 3.9 percent, to $58.32.

3M, the maker of Scotch tape
and Post-It Notes, said quarterly profit jumped 7 percent on strong
growth across all regions, but sales missed expectations. The company
raised its profit outlook for the full year. But the company announced
plans to cut prices on its profitable films for LCD television screens.
The stock fell $8.11, or 8.6 percent, to $86.62.

Wachovia Corp.
fell $1.74, or 3.6 percent, to $46.40 after reporting third-quarter
profits fell 10 percent due to write-downs related to difficult credit
market conditions. The nation’s fourth largest bank signaled increasing
credit troubles ahead and said there would be staff cuts.

Google rose $5.09 to $644.71 after the search engine leader said advertising spending lifted third-quarter profit by 46 percent.

Declining
issues outnumbered advancers by more than 5 to 1 on the New York Stock
Exchange, where volume came to 1.79 billion shares compared with 1.27
billion shares traded Thursday.

The Russell 2000 index of smaller companies fell 26.24, or 3.18 percent, to 798.79.
Overseas,
Japan’s Nikkei stock average closed down 1.71 percent. Britain’s FTSE
100 fell 1.23 percent, Germany’s DAX index fell 0.47 percent, and
France’s CAC-40 fell 0.46 percent.