Industrials Post a Record Drop; Trade Data, Interest Rates Cited
Disappointing news on the U.S. trade deficit and a sharp rise in interest rates dealt the stock market a crushing blow, pushing the Dow Jones Industrial Average to its biggest one-day point loss ever.</br></br>The industrial average plummeted 95.46 to 2412.70, a 3.8% fall. Yesterday's drop surpassed the 91.55-point tumble it took Oct. 6. The decline surprised many market professionals because it appeared that the recent slide for stocks might be leveling off; the average had moved up more than 36 points Tuesday.</br></br>Some traders found minor consolation in the fact that yesterday's fall wasn't anywhere near the record 12.82% drop of Oct. 28, 1929, when the industrial average lost 38.33 points to close at 260.64.</br></br>"Everyone is shellshocked, including ourselves," said Jack Baker, head of capital commitment at Shearson Lehman Brothers in New York. "The market was really surprised that the trade numbers didn't show that much of an improvement."</br></br>Before the market opened yesterday, the Commerce Department reported that the August merchandise trade deficit narrowed to $15.68 billion from $16.47 billion in July. Economists surveyed by the Dow Jones Capital Markets Report were looking for an average gap of about $15 billion; some market participants were expecting a gap as small as $13.5 billion. Rates in the bond market shot up on the news.