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Dow ends below 10,000 on strong GDP data

NEW YORK: US stocks were slammed on Friday with the Dow industrials closing below 10,000 for the first time in more than 10 months after strong gross domestic product data reinforced fears that interest rates will rise sharply.

The broad sell-off, which also sapped the usually resilient technology sector, got started after fourth-quarter GDP figures showed a bigger-than-expected jump, further proof that the nation's economic expansion gave no signs of easing up.

"This market is grappling with how much Fed tightening it needs to discount -- the thing that got it going was the 7 percent GDP number," said Jeffrey Applegate, chief investment strategist at Lehman Brothers. "The Fed's speed limit is 3.5 to 4 percent -- they (Fed bankers) are going to raise rates to ensure that happens."

The Dow Jones industrial average swooned 230.51 points, or 2.28 percent, to 9,862.12, falling below the 10,000 mark for the first time since April 6, 1999.

The blue-chip Dow is well in correction mode, having dropped more than 10 percent -- 15.87 percent -- from its Jan. 14 high of 11,722.98. The Dow is down 3.5 percent for the week.

Some of the biggest weights on the Dow were its technology components, with computer maker International Business Machines Corp., off 5-1/4 at 105-5/8, and rival Hewlett-Packard Co., off 4-7/8 at 124-5/8.

The broader Standard & Poor's 500 Index slid 20.07 points, or 1.48 percent, to 1,333.36. The index was down 0.94 percent for the week.

The Nasdaq Composite Index, which had seesawed all session, fell 27.15 points, or 0.59 percent, to 4,590.50. Earlier, the technology-stacked index had touched a new intraday high of 4,662.93. For the week, the Nasdaq was up 4.05 percent.

Intel Corp., a Dow component since Nov. 1 and one of the biggest names on Nasdaq, fell 1 to 113-1/4.

The Russell 2000, a small-cap barometer, outpaced the broad market, rising nearly 0.50 percent to 556.74.

The catalyst for the broad pullback was the Commerce Department's report that the economy grew at a stronger-than-expected 6.9 percent in the last three months of last year, well ahead of a previous estimate of 5.8 percent. In a Reuters survey, analysts had expected the data to be revised upward by a smaller amount -- for a gain of 6.4 percent.

"The GDP figures were a little bit stronger than expected but there were no inflationary numbers in there," said Barry Hyman, market strategist for Ehrenkrantz, King Nussbaum Inc.

The long bond slipped, with the price of the 30-year US Treasury down 2/32, keeping the yield at 6.14 percent, steady with Thursday's close. The 10-year note, meanwhile, rose 7/32, with the yield at 6.34 percent.

Wall Street feared that the robust GDP figures could give the Fed more ammunition to hike rates aggressively, starting with the next meeting of its rate-setting committee on March 21.

"The stock market more and more is waking up to the realisation that two more interest-rate hikes, and perhaps three," are being factored in, said David Sowerby, market strategist at Loomis Sayles in Detroit.

On the New York Stock Exchange decliners beat advances 18 to 11 with 1.06 billion shares changing hands.

Bucking the downtrend were automaker stocks after General Motors Corp., Ford Motor Co. and DaimlerChrysler AG said they planned to channel their online supply buying through a single Internet portal.

GM rose 1-13/16 to 77-1/16, Ford climbed 1 to 42-15/16 DaimlerChrysler advanced 1-9/16 to 63-1/2.

Oracle Corp. jumped 8-11/16 to 70-5/8 and Commerce One Inc. jumped 34-1/16 to 213-1/16 with the two companies expected to spearhead the technology behind the automaker venture. Oracle was the top mover on the Nasdaq.

Drugs stocks were hit by selling, with Johnson & Johnson, Merck & Co. and Schering-Plough Corp. all moving to lows not seen in one year.

Schering fell 2-3/8 to 34-11/16 and J&J slid 1-11/16 to 71-3/16. Merck was off 1-3/16 at 60-3/16.

Interest-rate-sensitive financial services stocks backtracked, with American Express Co. off 5-7/16 at 124-5/8 and J.P. Morgan & Co. Inc. down 1-11/16 at 107-7/8.

Some pockmarked earnings news did nothing to soothe the jangled nerves of investors.

Intuit was slammed after the personal-finance software company's quarterly earnings met analysts' targets, but did not satisfy Wall Street at large. The stock was off 13-3/4 at 58-9/16 in heavy Nasdaq trading.

Internet Capital Group fell 12 to 107-1/8 after the company, which invests in many Internet companies, said it expects to post losses for "many quarters in the foreseeable future."

On the initial public offering front, Intersil Holding Corp.'s surged 29 to 54 as the semiconductor maker made its Wall Street debut. The stock was priced late Thursday at $25 a share in Intersil's IPO.-Reuters