- The Washington Times - Friday, February 25, 2000

NEW YORK Blue-chip stocks sank again in volatile trading Thursday, sending the Dow Jones Industrial Average briefly below 10,000, but the Nasdaq composite index hit a new closing high for a second straight day.
In a session punctuated by fears of higher interest rates, the Dow finished down 133.41 at 10,092.63. The index had fallen as low as 9,942.78 before bargain hunters entered the market.
The technology-dominated Nasdaq, which had been down about 50 points, closed up 67.32 to 4,617.65, bringing its two-day increase to 235.12.
The Standard & Poor's 500 index was down 7.26 at 1,353.43.
"These 100-to-200-point swings are now the norm and everyone takes them in stride," said Larry Wachtel, market analyst with Prudential Securities.
The volatility that has defined the stock market in recent weeks is a result of higher prices: Because many stocks are expensive, a handful of Dow and Nasdaq components can cause huge swings in those indexes.
The last time the Dow traded below 10,000 was Oct. 18, and its last close below that milestone came April 6. The Dow is now down 14 percent from the closing high of 11,722.98 it reached Jan. 14.
Although the Nasdaq has been growing in importance over the past year and has dominated stock market headlines since late last year, analysts were concerned by the Dow's drop.
"No one should underestimate the psychology of moving below 10,000," said Hugh Johnson, chief investment officer at First Albany Corp. "When the Dow dropping moves from the business page to the front page, it will scare some investors … and could lead to more selling."
Blue-chip stocks, mainly banks, drug companies and retailers, have fallen as Federal Reserve officials said they intend to raise rates to reduce inflationary pressures in the robust U.S. economy.
"Rising rates are hurtful to the economy and the components of the Dow are adjusting to that," said Mr. Wachtel of Prudential Securities.
Dow stocks, particularly retailers and banks, are heavily swayed by interest rates because rising rates slow borrowing and consumer purchasing. With a series of rate increases this year looking more likely, the Dow has fallen five out of the past six sessions.
"This is like 'Groundhog Day.' We know this story. We've seen it almost every day," said Arthur Hogan, chief market analyst at Jeffries & Co. He referred to the movie where the main character keeps living Groundhog Day over and over again.
Technology stocks, which have become largely immune to concerns about rising rates, have spent much of 2000 rallying at the expense of blue chips. Investors are increasingly more attracted by the computer, telecommunications and Internet firms' promise of bigger profit gains.
American Express, down $9.12 to $129, and Wal-Mart, off $2.93 to $44.06, led the Dow lower Thursday. But Intel rose $5.31 to $114.37 after an analyst upgraded the chip maker's rating.
America Online, which had lost nearly half its value since announcing its acquisition of Time Warner, rose $2.87 to $60.06. That caused Time Warner to rise $9.75 to $86.31.
Dell Computer, up $1 to $42.37 and 3Com, up $5.37 at $83, helped power the Nasdaq. But the telecommunications firm Qualcomm fell $7.18 to $139.68.
Declining issues outnumbered advancers by a 2-to-1 margin on the New York Stock Exchange, with 1,049 up, 2,014 down and 442 unchanged.
NYSE volume totaled 1.16 billion shares vs. 975.5 million in the previous session.
The Russell 2000 index of smaller companies rose 4.13 to 554.04.
Overseas, Japan's Nikkei stock average rose 0.3 percent, Germany's DAX index was down 0.7 percent, Britain's Financial Times-Stock Exchange 100 was down 0.9 percent, and France's CAC-40 was up 0.8 percent.

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