This story was reported and written by Washington Post staff writers Caroline Mayer, Mark Potts, Rudolph A. Pyatt Jr., Sandra Sugawara, Elizabeth Tucker and Sharon Warren Walsh.

Directors of DynCorp will find out today how much damage last week's stock market plunge did to the McLean professional services and contracting company. After rejecting a $24-a-share leveraged buyout offer earlier this month, the board is to consider a number of new bids. With the stock falling as low as $9 last week before recovering to $16.75 a share, company officials say they're not sure what to expect.

DynCorp could be in for "low-ball offers" in the wake of the stock market plunge, said spokesman Lee Parker. "We've had a number of interested parties looking under the hood, but what sort of effect the market gyrations have had is hard to say."

DynCorp is one of many Washington area companies buffeted by the steep decline in stock prices.

For some companies, the sharp drop has upset financingplans, imperiled mergers, created opportunities, increased vulnerability to takeovers and shaken employe and stockholder morale.

Last week, the average value of selected area stocks fell 17.8 percent, to $16.22 cents a share from $19.73 cents a share, while the Johnston, Lemon index, which measures 30 local stocks, fell 15 percent, to 862.311 from 1014.232. By contrast, the Standard & Poor's 500 stock index, a widely watched measure of overall stock performance, dropped 12.2 percent during the week.

The Numbers

When stocks dropped nationally, so did local issues. By Friday, only three of 184 local stocks tracked by The Washington Post showed an increase on the week. But while the local performances generally mirrored national trends, there were some significant differences.

Because many local stocks are high-technology companies traded on the American Stock Exchange and over-the-counter markets, they were slower to rebound when the market came back in midweek than were the blue-chip issues that trade on the New York Stock Exchange. When nervous investors went back into the market Tuesday to buy heavyweight industrial issues that are considered the safest investments, Washington stocks continued on their downward path. The Johnston, Lemon & Co. index of 30 Washington area stocks fell 4.3 percent Tuesday, even as the Standard & Poor's 500-stock index, a broad-gauge market measure, was climbing about 5 percent.

It was not until Wednesday, when the overall rally spread into the Amex and OTC markets, that most local issues recovered.

Even then, some local stocks continued downward. One reason, according to analysts, is that the Washington area has its own blue-chip issues that investors bought first before renewing their interest in more speculative stocks. Banks and big local companies, such as Marriott Corp., Martin Marietta Corp. and Giant Food Inc., were among the biggest winners on Wednesday.

"We saw, in the recovery, the big blue chips initially doing well and the secondaries lagging behind," said Elliott Benson, an analyst at Ferris & Co.

"Once you've shaken confidence, people, if they are going to get involved, are going to start with the safer securities," said Leslie Silverstone, who heads the local office of Dean Witter Reynolds Inc. "Obviously, the bluer-chip companies are going to hold up better. ... I think people are more interested now in The {Washington} Post and Giant than they are in XYZ Computer."

The Big Losers

Many local companies lost 20 percent or more of their stock value on Monday alone, and while some recouped a bit, others continued to decline during the week.

The week's biggest local loser was Dart Group Corp., the retail holding company controlled by the Haft family. Forced by the tumbling market to drop a long-running $6.3 billion takeover offer for Minneapolis retail giant Dayton Hudson Corp., Dart saw its stock plummet. It started the week at $150 a share and slid steadily into double digits. By the close of trading Friday, it was at $74.50.

Although sources said the abortive bid for Dayton Hudson would cost Dart about $70 million after taxes, market observers said the main reason for the stock's weakness was that arbitrageurs -- Wall Street's professional speculators -- had invested deeply in Dart stock in the hope that the company could make a handsome profit from its bid for Dayton Hudson. When the deal fell through, the arbs sold en masse, further motivated by a need to raise cash to cover the losses they were taking on other holdings Monday.

Just as blue-chip issues led the rally later in the week, they also were at the forefront of the decline in local stocks. Banks and retailers joined local high-technology firms as the biggest losers in the first wave of selling.

"The banks have taken a beating," said Lew Sosnowik, head of trading at Washington's Lang & Co.,a division of North American Investment.

Patrick Ryan, vice president and manager of equity trading at Johnston, Lemon, said the huge decline in national blue-chip issues on Monday spread quickly into local bank stocks. "Bank stocks are owned by the same people who own IBM and other blue chips -- institutional investors," Ryan said. And those investors were leading the selling.

Some analysts said stocks in retailing companies were particularly vulnerable because of early perceptions that the stock market dive could presage a recession that would injure store sales.

"A lot of consumer-related stocks have been heavily sold based on expectations that consumer spending is going to be cut back," Benson said Thursday. "If what we're all looking at is interpreted the way we're all interpreting it, consumers are going to be cutting back this year, if not this Christmas."

By week's end, however, fears of impending recession had abated somewhat and most retailers were reporting confidence in their ability to maintain sales volume. Michael Lavington, president of Kay Jewelers Inc., said his chain's daily sales reports had shown a drop Tuesday, but returned to normal the rest of the week. "It seems to be a nonevent as far as our business is concerned," he said.

Technology stocks were harder hit than most, analysts said, because they tend to be speculative issues that investors bail out of at the first sign of trouble. "Everything is just getting hit left and right, all these over-the-counter stocks," said May G. O'Leary, an analyst in the Richmond office of Baker, Watts & Co., a regional brokerage. "Even when decent news might be coming out, it doesn't matter, they're getting hit."

Bad News Bears

William H. Borten, president of Atlantic Research Corp., found out firsthand how little appetite Wall Street had for good news after hundreds of millions of dollars of investments had been wiped out.

The Fairfax professional services company had won a coveted invitation to address the New York Society of Investment Analysts. For a relatively small company like Atlantic Research, such a session can be a major coming-out party: a chance for executives to strut their stuff, put on a dog-and-pony show about the company's attributes and announce some good news, in this case a healthy rise in profits.

Problem was, the meeting with the analysts was on Tuesday, the day after Monday's plunge.

"It was incredibly bad timing," Borten said. Only 19 analysts -- rather than the usual 100 or so -- showed up for the luncheon meeting. And they didn't seem to care much about the company's good news. "We came up all set to announce our third-quarter earnings, which were 43 percent up, and we're hearing how our stock is reaching new lows," Borten said. "It was very depressing."

Even the jokes Borten had prepared to lighten up the meeting went flat. At the start of his speech, Borten said, he joked that he had read in the newspapers that things were so bad on Wall Street that even the hot dog vendors were not doing well. "I told them that when I came in that morning, the hot dog vendors were doing a brisk business, so things must be on the way up," Borten said. "The laughter was pretty weak."

Stopped Short

For some local companies, the plunge dashed plans to raise money by selling stock. Several initial public stock offerings and plans to sell additional shares were killed last week by Washington area firms because of the slide.

"This is not the time for that kind of thing," O'Leary said. "Financing in that manner is just out of the question."

"In this kind of market, virtually nobody can raise any money, that's all there is to it, because practically nobody is going to want to go into a new issue," said Sid Wachtel, head of Wachtel & Co., a local brokerage. "It's hard to conceive that anyone can successfully bring a new issue out now, and a number have been canceled already. Those presently in registration will either be canceled or put on hold."

EZ Communications, a Fairfax broadcasting company, was scheduled to sell stock to the public for the first time Friday, but shelved the offering after three or four months of planning and a "road show" of presentations to analysts and prospective investors, according to its president, Alan Box.

EZ had hoped to sell two million shares at between $11 and $13 to raise cash for acquisitions, but now will wait to see what happens to the market, Box said.

Similarly, Kay Jewelers was forced to scrap a recently announced plan to raise as much as $20 million through a stock offering to current shareholders.

The money would have been used to fund ambitious expansion plans next year. The planned offering -- which would have been valued at between $18 and $20 a share -- became untenable when Kay's stock dropped from $18.50 to less than $15 last week.

"We felt that we weren't prepared, with the stock now at around $15, to go through with that," Lavington said. "I think we'd still like to do that, but we'll wait until the market is a little stronger."

Some local companies made it to market just in time. C3 Inc. of Herndon, for instance, spun off its Tempest Technologies Inc. division in an initial public offering earlier this month, right at the beginning of the decline that led to Monday's steep drop.

Richard C. Litsinger, C3's chairman and president, said the underwriters of Tempest stock had originally hoped to go to market at about $11 a share, but told company executives at a pricing meeting on Oct. 14 that the best they could do was $9.

"I think a lot of institutional guys were starting to feel a bit goosey," Litsinger said. "The IPO window was pretty rapidly closing."

Litsinger and Tempest President Delaney Blaine decided to go ahead with the stock sale at the lower price -- and as a result may have presided over the last initial public offering for some time. Even at that, Tempest came to market Oct. 15, a day when the Dow Jones industrial average lost 95 points. By the end of last week, Tempest stock, which opened at $9, was down to $6.

"Fortunately, we made the decision to {make the offering} and not delay," Litsinger said. "We wound up looking like prophets."

Some companies blocked out of the stock market by tumbling prices, such as Kay Jewelers, say they may be able to raise money in coming weeks through other means, such as the bond market and borrowing, especially with interest rates down.

Laura Paugh, treasury manager of Marriott, said she sees "great opportunities" in the bond market, while Dominion Resources Inc., is considering moving up a $100 million financing package that had been planned for early next year. "We will go to the market sooner if the interest rates stay lower, but I would not be willing to predict that they are going to do that," said O.J. Peterson III, vice president and treasurer of the utility holding company, whose subsidiaries include Virginia Power. "I think the smart people will wait and let things cool off a little bit."

Such a Bargain

Like many corporations nationally, some local companies took advantage of the overall decline in stock prices to announce or accelerate plans to buy back their own stock. While such a step can increase a company's debt-to-equity ratio, it also helps lift stock prices by setting a sort of floor under a company's stock, analysts say.

Among the local companies announcing such plans were Perpetual Savings Bank and Best Products Co. Inc. "We felt it was an opportunity we couldn't pass up," a Best spokesman said. "It was imperative we go out and buy stock."

In addition, companies including MCI Communications Corp., ERC International Inc. and Fairchild Industries Inc. said they had taken advantage of the week's lower prices to go into the market and buy some of their own stock; Martin Marietta said it was considering doing so.

Another company, Radiation Systems Inc., also bought back some of its stock last week, in part to help defend against a takeover bid by a New York partnership called Metropolitan Securities.

But Richard E. Thomas, chairman and president of the Sterling-based high-performance antenna maker, said takeover defense was by no means the company's only motivation in the buyback.

"We just felt the stock at the average price we paid -- somewhere around $8.37 1/2 a share -- was a very, very good bargain and represents significantly more value to us than that."

Merger Mania

For executives of Sovran Financial Corp., last week's slide was a nail-biter. The Norfolk-based bank holding company is in the midst of a merger with Commerce Union Bank of Nashville, and the decline in stock prices threatened to blow the whole deal.

Sovran stock opened at $37.50 on Monday, but by Tuesday was down $10, to $27.50. That brought it close to triggering a "walkaway" clause in the merger agreement with Commerce Union that permits the Tennessee bank to back out of the deal if Sovran's stock declines more than the Nasdaq index for over-the-counter stocks.

Worried Sovran officials watched helplessly as their company's stock skidded, but the price stabilized in midweek and began moving back up. The merger is expected to be completed Nov. 1.

Alleco Inc. wasn't so lucky. The former Allegheny Beverage Corp. said Friday that a plan to sell its Service America Corp. division to Servam Corp., a new company formed by executives of the division and outside investors, is in trouble because Servam had been unable to complete the financing for the deal.

Unless Alleco can somehow resurrect the deal by the end of this week -- which analysts regard as unlikely -- the financial troubled Cheverly services company has said it will be unable to meet a payment due on its bank loans and could be forced to declare bankruptcy.

The decline in stock prices could introduce other local companies to merger mania. Analysts say lower prices could make some companies more vulnerable to takeover, and indeed, Atlantic Research, which recently repelled a takeover bid by Clabir Corp., learned Friday that another possible suitor, Sequa Corp., had increased its stake in the company to 17.5 percent.

Sequa has said it is buying the stock for investment purposes, but has not ruled out a takeover bid. Atlantic Research said Friday it would buy back up to 465,000 of its 9.3 million shares, although the company did not say it was doing so as a takeover defense.

Litsinger conceded that the drop in C3's stock price last week "put us in a position where we would be a more attractive takeover target." But he added, "That's not going to keep me up nights, because there's so many other guys in the same boat. ... I think the raiders are about where John Barrymore was when he said, 'So many women and so little time.' "

Some analysts say the threat of takeovers is lessened because there will be some problem financing such deals until markets stabilize.

"The big bucks needed for takeovers just will not be available for borrowing, even at declining interest rates," Wachtel said. "It doesn't matter what the prices of the stocks are -- it's going to be extremely difficult to get any money to do anything."

Some local companies see the depressed market as an opportunity to step up some of their acquisition plans.

"We are looking actively for acquisitions that would have a good synergism with Radiation Systems' products," Thomas said. "This is really a buyers' market, as far as I'm concerned, and we are going to double our efforts."

Around the Water Cooler

At Washington companies, as elsewhere around the nation, the stock market replaced the Bork nomination, the football players' strike and the World Series as the prime topic of office gossip last week. People compared losses and strategies and traded the latest word on the ups and downs of the Dow.

The role of stocks as a backbone of many pension plans and in employe stock ownership plans gave the subject a broader interest. Even those lucky people who weren't in the stock market when the selloff hit still were affected through pension and ESOP plans, particularly on the first day of the drop.

"There was grave concern," said James S. Culp, vice president for investor relations at Potomac Electric Power Co. "Our employes lost a lot of money that first day through the employe savings plan and also through the employe stock ownership plan."

Through the two stock plans, Pepco employes are the utility's single largest group of shareholders, with about 5 percent. "The value they lost was enormous, and then it recovered," Culp said. "The employes soon found themselves back at the level before the break in the market, and our employes have not suffered a loss."

Employes at Dominion Resources saw the value of their holdings plunge 5 percent the first day, then rebound somewhat later in the week. "Everybody talked about it -- it was the only thing everyone talked about that day," Peterson said. "Everyone in our company is concerned about this erratic market. Everybody's confidence is shaken; we don't know what it will mean until we go forward."

Shareholders also were worried. While some large local companies said the calls to their investor relations departments were somewhat less frantic than usual -- after all, they weren't the only stocks going down -- other companies said they spent a good deal of time comforting concerned investors.

Philip Pietras, chief financial officer of Flow General Inc., a McLean technology company, said wide swings in the company's stock this week led to a number of calls. Flow General stock was the fourth-largest percentage loser on the New York Stock Exchange Tuesday -- then was the fifth-largest percentage gainer the next day.

"We had quite a number of calls from shareholders and analysts wanting to know if we'd released any information that would cause the swings," Pietras said. "The answer was no. The activity in our stock was really attributable to the volatility of the market."