Blue-Chips Fall Sharply Lower

The best performance by U.S. stocks in over a decade Tuesday seemed but a faint memory Wednesday, as concern over the White House scandal and Latin American economies sapped the market's vigor and several more blue-chip companies warned of disappointing near-term results.

The Dow Jones industrial average sank 155.76 points, or 1.9 percent, to 7,865.02.

The selling picked up speed in mid-morning after newswires reported that House Speaker Newt Gingrich wants the public to have access to Independent Counsel Kenneth Starr's report on President Clinton. By late afternoon, the report had landed on Capitol Hill.

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"I would say that the Asian situation and how it impacts the U.S. economy is maybe 50 percent and the market's overvaluation is also another 30 percent to 40 percent of the equation," Harrington said, adding, "I think the political situation has already been factored into market prices to a certain extent."

Cautionary words from Merrill Lynch sent the retail sector to the day's biggest losses, while bank and brokerage shares fell on continuing worry over exposure to emerging markets. Technology stocks, meanwhile, traded lower in line with blue-chip averages, as did the broader market.

"Tuesday's bullish action was indeed the start of something, but the market is not going up 380 points a day for the next few months," Robert Dickey, managing director of technical research at Dain Rauscher Wessels, said in a report.

On Tuesday the Dow soared 380.53 points, or 5.0 percent, for its biggest point gain ever. In percentage terms, it was the biggest gain since the 10.2 percent vault of Oct. 21, 1987.

The surge occurred after weekend comments by Federal Reserve Chairman Alan Greenspan. He hinted that the risks of an economic slowdown as a result of the spreading global financil crisis might outweigh the risks of inflation.

In Wednesday's overseas news, Japan's central bank halved its key call rate target to 0.25 percent from 0.50 percent. The rate is what banks charge each other for overnight loans. The move, the first monetary policy easing since 1995, has the effect of trimming corporate borrowing costs as the Japanese government tries to kickstart its economy, in its worst recession since World War II.

But Japan's stock market was grounded, with the Nikkei 225 index losing 1.1 percent, hampered by talk that Fuji Bank Ltd. incurred major derivatives losses in overseas investments. The bank termed the speculation "totally groundless."

European markets fell. London's FTSE 100 index shed 0.6 percent, Frankfurt's DAX index 1.2 percent, and Paris' CAC 40 index 1.1 percent.

In Wednesday's market highlights:

• The Standard & Poor's 500 Index fell 1.7 percent.
• New York Stock Exchange losers bested winners by 2,151 to 905.
• On the Big Board floor, turnover ebbed 14 percent to 703 million shares.
• The Nasdaq Composite declined 2.2 percent. On Tuesday, the index surged to its biggest point gain in history.
• Declining issues led advancers by 2 to 1 in the Nasdaq Stock Market. Volume totaled 679 million shares.
• The Russell 2000 Index of small-capitalization stocks sank 2.6 percent.
• In the bond market, the 30-year Treasury advanced 1 14/32, to yield 5.271 percent.
• Merrill Lynch (MER) said exposure to emerging markets slimmed its profits by $135 million in July and August. It still emerged with income of $102 million in the period. The stock fell 6 7/8 to 59 1/8.
• Procter & Gamble (PG) plunged 7 3/4 to 71 7/8. The consumer products powerhouse said Russia's debacle will halt some product shipments, with first-quarter growth expected to be in the "mid-single digits." The effects of the strong U.S. dollar are another hamper on profits. But P&G anticipates results for the fiscal year ending June 1999 meeting consensus projections.
• Appliance manufacturer Maytag (MYG) gained 1 13/16 to 46 9/16. The company eyes third-quarter revenues up as much as 20 percent over the year-ago quarter. In addition, it expects to beat most analysts' earnings forecasts of 70 cents a share in the period. Maytag attributed the upbeat outlook to elevated sales from its high-end products.
• Eagle USA Airfreight (EUSA) fell 8 13/16, or 40 percent, to 13 1/2 after the provider of airfreight services said fourth-quarter earnings will likely come in between 27 cents and 31 cents a share. Wall Street had counted on 34 cents.