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. Last Updated: 07/27/2016

Dow Drops 3% On Yen Worries




NEW YORK -- The U.S. stock market took investors on a wild rollercoaster ride Tuesday, starting the day up and then plunging almost 300 points to bring the Dow industrials' losses to 9 percent from the peak reached less than a month ago.


Worries about Wall Street shook European and Asian markets as well, leaving them in the red for a third straight day.


Russian stocks shrugged off the global slump, but analysts predicted the market would be hit hard Wednesday.


The Dow Jones industrial average plummeted 299.43 points, or 3.41 percent, to close at 8487.31 in heavy trading Tuesday. That brought its decline to 850.66 points from the record 9,337.97 of July 17. The Dow has fallen about 6 percent since it turned south Friday.


The technology-heavy Nasdaq composite index got hit even harder, falling 65.41 points, or 3.53 percent, to 1,785.69.


Trading was extremely choppy. In the morning, blue-chip stocks rose about 70 points but quickly turned around and headed into negative territory.


Renewed worries about the weak Japanese yen, which could further swell the nation's trade deficit and hurt U.S. corporate profits, fueled Tuesday's selling.


Analysts predicted the Dow could be on course for a 15 percent to 20 percent pullback from its July record.


Ralph Acampora, Prudential Securities director of technical research, said he would no longer characterize the market's downturn as a "stealth decline" whereby stocks fall across the board but blue-chip issues fall less sharply.


"The implications are the Dow will eventually go lower and take out its June 1998 low," Acampora said. "If we close below that, then ... the Dow could drop 15 to 20 percent from its 1998 closing high," he said.


Some market analysts cautioned there would be support for the market at about 8,650, but after that level was punctured, the blue-chip index could keep falling toward 8,000.


The key indexes in London, Frankfurt and Paris dived to end the day down about 1 percent at six-week lows.


Europe's worst performing market was London, where the FTSE 100 Index fell 1.3 percent to 5,736.10.


Russia's stock market ignored falling indexes Tuesday, with the Moscow Times Index of 50 leading shares ending a day of thin trading down a mere .19 percent at 298.80.


But the sharp fall on Wall Street is expected to deal a body blow to Russia when the market opens Wednesday.


"Asia will react to this and Russia will react to what happens in Asia," said Ashley Dodd-Noble, an analyst at Paribas in London. "If the Dow ends down less than 1 percent then it won't have a huge effect ... but this could be significant sell-off."


Russia's market, still dominated by foreign investors, has closely tracked the Dow for more than a year. Declines on Wall Street and other emerging markets have often been followed by even sharper falls in Russia, which has been battered by Asia's financial crisis.


World markets are feeling pressure from Japan as they wait for Tokyo's new government to back up its verbal support for the currency with action.


"The only thing that is really going to help is if (the government) really does something. People are waiting for some real action," said Kenneth Ducey, director of trading at BT Brokerage in New York.


The dollar briefly set a fresh seven-week high of 146 yen in Asian trading before falling almost 2 yen Tuesday as Finance Minister Kiichi Miyazawa joined a chorus of officials in defending the battered Japanese currency.


Miyazawa said his comments last week that yen levels and stock prices would best be left to the market did not mean foreign exchange intervention was unnecessary.


His statement helped the yen rally from 146 to the dollar to 144.23, though it later slipped back to above 145.


With Asian currencies back in the stock market's focus, the renewed slide of the yen in recent days has reignited fears of a competitive currency devaluation by China.


That fear pushed Tokyo's stock index down 0.88 percent to 16,023.58 and set the stage for a nervous European session.


Hong Kong shares ended up after an early tumble, but shares in Jakarta, Manila and Thailand took heavy losses amid fears that the yen weakness could prompt another round of market turmoil.


Hong Kong's Hang Seng Index rose 28.03 points, or 0.37 percent, to finish at 7,580.80 after recovering from a low of 7,377.81.


Traders in Jakarta said regional weakness had been the catalyst for a sharp fall in the share market's blue-chip stocks which saw the overall index slide nearly 3 percent. The composite index ended at 461.35, down 13.91 points.


New government steps to revive Thailand's recessionary economy sparked little enthusiasm from analysts or Bangkok markets.


The 25-point plan, including a big injection of funds into the agriculture sector and a raising of the public sector budget deficit, came with a prediction that the economy would show signs of recovery by early 1999.


But it failed to distract traders from the grim outlook for the Thai banking sector Tuesday. The main SET index ended down 1.09 percent.