An Appraisal: Interest Rate Rise Hastens an Exodus From Stocks
The rapid rise in interest rates since late March is turning off some people who have invested in stocks. They are selling shares and hoarding cash, with a few already hunting for bargains in the bond market.</br></br>The move away from stocks accelerated Friday as the Dow Jones Industrial Average tumbled 52.97 to 2272.52. It was the fourth-largest point decline in the history of the industrial average.</br></br>"There were a lot of reasons not to buy stocks," said Peter Furniss, a managing director with Smith Barney, Harris Upham & Co. in New York. Traders said they saw few buyers for stocks Friday. On the New York Stock Exchange, 1,378 stocks lost ground while just 291 advanced.</br></br>The Standard & Poor's 500-stock index sank 6.81 to 287.43 and the Big Board's composite index dropped 3.51 to 162.25.</br></br>For stock investors, a litany of negative news Friday fanned fears of surging inflation and much higher interest rates. Producer prices jumped an unexpectedly sharp 0.7% in April and major banks raised their prime lending rates to 8 1/4% from 8%. It was the third increase in the prime rate in seven weeks, with the previous one just two weeks earlier.