THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, April 9, 1996 TAG: 9604090276
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: STAFF AND WIRE REPORT
LENGTH: Medium: 74 lines
Fears that a strong economy could trigger higher interest rates caused stock prices to plunge Monday, although a modest afternoon recovery was paced by rebounding technology stocks.
The Dow Jones industrial average fell 88.51 points - about 1.6 percent - to close at 5,594.37. The Dow had been off as much as 140 points.
Early in the day, investors sold off shares, pushing down stock prices, in reaction to Friday's report of 140,000 new jobs added in March, twice the number expected.
Traders were unable to react to the jobs data when they were released Friday because the stock market was closed for Good Friday.
Investors regarded the jobs report as a sign of a strong economy, which can be interpreted to mean lower interest rates are unnecessary, or even that higher rates are in the offing to subdue a possible bout of inflation.
``I think there's the potential for further downside,'' said Kathryn Lunstrum, investment strategist at Duff & Phelps Equity Research in Chicago. ``Eventually, the impact of higher rates is going to catch up with us and precipitate a further slowing in the economy.''
Traders began the sell off Monday moments after the market opened. Trading limits were imposed by the New York Stock Exchange on Big Board trades within the first seven minutes of trading.
Trading began with the so-called ``sidecar rule'' in place at the Chicago Mercantile Exchange, which limits trading in the Standard & Poor's 500 stock-index futures contract when its price falls more than 12 points in a session. A second trading limit was placed on the contract after it fell more than 2,000 points.
The sell-off on Wall Street cut deeply and broadly into stock valuations.
The Standard & Poor's 500 stock index was off 1.8 percent and the Nasdaq composite index was down about 1.1 percent.
The Dow Jones utility index fell 5.24 points, or 2.46 percent, to 208.01. The Dow Jones transportation index slid 38.74, or 1.76 percent, to 2,167.94.
Ricky Harrington, a technical analyst at Interstate-Johnson Lane in Charlotte, said stocks recovered Monday in part because technology issues, which have historically been market leaders, recovered in the afternoon.
IBM, which had been down 3 1/4 in the morning, rose as much as 1 point in the afternoon before ending down 1 7/16 at 116 Compaq ended up 2 3/8 at 40. Hewlett-Packard was up 1 at 97 3/8.
Shares of several Virginia-based companies, ranging from railroads to banks and manufacturers, recovered modestly Monday afternoon but still were down for the day.
Norfolk Southern Corp., the railroad based in Norfolk, closed at 82 1/8, down 1/8. Shares of Virginia's larger banking companies, including Crestar Financial Corp. and Signet Banking Corp., also retreated. Crestar, which closed at 57 1/8, was off 1 1/4, and Signet fell 1 to 25 1/8.
However, CENIT Bancorp Inc., the Norfolk-based parent of a thrift and a community bank, climbed 1 to 34.
A handful of Virginia companies that stand to benefit from a stronger economy advanced. Noland Co., the Newport News-based wholesaler of plumbing, heating and cooling supplies, jumped 1 1/2 to 19 1/2. And aluminum producer and fabricator Reynolds Metals Co. edged up 5/8 for the day to 59 7/8.
On the overall stock market Monday, shares of telephone, oil and electric utility stocks were among the biggest losers. The common thread was big dividends.
Companies whose dividends are larger than average suffered as the prospect of rising interest rates lessened the attraction of their big payouts.
As interest rates climb, investors looking for steady income-paying investments have more alternatives. Among stocks paying dividends larger than average, Mobil slid 2 1/2 to 116. MEMO: Staff Writer Tom Shean contributed to this report by the Associated
Press and Bloomberg Business News.
by CNB