Budget Stalemate Prompts Dow to Plunge
- By Unknown
- Jan. 12 1996 00:00
The Dow Jones industrial average plunged 97.19 points Wednesday to 5,032.94, adding to Tuesday's slide of 67.55 points and dropping the blue-chip index to its lowest close since late November.
At midday Thursday the Dow had risen slightly to 5042.
Word late Tuesday that U.S. President Bill Clinton and Republican leaders had suspended budget negotiations helped accelerate financial markets' decline, and set the stage for Wednesday's continued sell-off, analysts said. Because stock and bond markets had rallied dramatically in 1995 -- in large part on optimism about a long-term balanced-budget plan that could keep interest rates and inflation low -- the inability of Clinton and Congress to strike a deal is fraying some investors' nerves.
Indeed, the price of gold, a barometer of investor concern, has been surging in recent days.
"I don't think the markets understood the magnitude of the differences between the two sides," said Leonard Santow, a principal at bond-consulting firm Griggs & Santow in New York.