War jitters sent stock prices plummeting on Wall Street yesterday as nervous investors fled from the uncertainty of the Middle East crisis and its potentially damaging impact on the U.S. economy.
The closely watched Dow Jones industrial average fell 52.48 points to close at 2603.96, after dropping 90.35 points shortly after the market opened. Throughout the day, the market averages gyrated sharply with every bit of news and rumor from the Middle East, at one point cutting the day's loss to only 11 points. Since July 17, when the market was at the 3000 level, the Dow has fallen almost 400 points, or 13 percent.
"People are very nervous. They don't know what to do," said Anthony J. Woodruff, head of equity trading at Kidder, Peabody & Co. in New York, as he watched the action.
Typical of the uncertainty was the sudden halt in the rise of oil stocks and oil prices after Iraq President Saddam Hussein made a speech that traders said was less bellicose than they expected and indicated the ruler might be willing to negotiate.
"It wasn't the war-mongering speech everyone was expecting," Tom Bentz, trading director of United Energy Inc. in New York, told United Press International.
Similarly, the benchmark 30-year Treasury bond, which dropped an average $5 per $1,000 in morning trading, rebounded in the afternoon to close just shy of where it began the day.
Domestic and foreign investment institutions were reported to be in the forefront of yesterday's selling, with an assist from the program traders, who profit from price differences in the stock and futures markets.
The waves of selling that greeted the opening bell quickly set off the trading "circuit breakers," or trading limits, at the New York Stock Exchange and the Chicago Mercantile Exchange. They are intended to slow the speed at which stock prices can fall.
Richard A. Grasso, president of the NYSE, praised the operation of the exchange's new rule, which requires that when the Dow falls 50 points, program traders can sell only when the market is moving up and can buy only when the market is moving down.
"It's been very successful and very effective," Grasso said.
Wall Street analysts agreed that the stock, bond and commodity markets were being held hostage to the uncertainty of the political and strategic situation in the Persian Gulf.
The downdraft in New York yesterday followed heavy selling in London, Frankfurt, Paris and Zurich but only moderate action in Tokyo.
In yesterday's trading on the NYSE, declining issues outnumbered advancing ones by nearly 6 to 1. Volume on the Big Board came to 194.6 million shares.
Philip Morris was the most active NYSE stock, falling 1 to 43 7/8. Consumer-oriented stocks have been hit hard recently as concerns about a recession have increased. By contrast, stocks of defense contractors rose along with expectations that cuts in defense spending would not be as deep as once expected. Raytheon added 1 1/8 to close at 62 1/2 and Loral closed at 29, up 1. But other companies with large defense contracts fell: General Electric lost 1 7/8 to 61 7/8, while Boeing was down 2 3/8 at 46 1/8.
Shares of Fluor, with major projects scheduled in Saudi Arabia, continued a week-long descent, dropping another 2 1/2 to close at 33 3/8.
As measured by Wilshire Associates's index of more than 5,000 stocks, the market lost $62.60 billion, or 2.01 percent, in value.
The NYSE's composite index fell 3.48 to 176.94. Standard & Poor's 500-stock composite index dropped 6.65 to 321.86. The Nasdaq composite index fell 8.91 to 379.68. At the American Stock Exchange, the market value index dropped 3.95 to 327.34.