Caution in European markets as Dow falls

EUROPEAN dealers warned of new stock market fears after New York's Dow Jones index dropped to its lowest level since January, yesterday.

The Dow Jones industrial average lost more than 150 points and analysts warned that the dealers will be wary when the exchangers open after the Easter weekend.

The Dow closed down 157.11 points, or 2.33 per cent, at 6,583.48, a slide that was the sixth largest in history in point terms and came on the heels of a 140 point skid on Thursday, the last trading session before the Easter weekend.

Financial markets were closed for Good Friday.

In the broader market, declining issues swamped advances 2,138 to 538 on active volume of 555 million shares on the New York Stock Exchange.

"There's clearly nervousness out there right now," said Mr Philip Orlando, chief investment officer at Value Line Asset Management.

The stock market was hammered after new data showed the economy was still in high gear, which boosted the risk that the Federal Reserve will raise interest rates again in the months ahead.

Last week, the Fed raised short term interest rates by a quarterpoint in an effort to keep the economy from over heating.

The government reported that in February personal income rose a higher than forecast 0.9 per cent against a revised 0.4 per cent increase the previous month, while consumption rose a smaller than expected 0.3 per cent, compared with a revised 0.1 per cent gain in January.

A sell off in technology stocks and a weak showing by health care stocks pulled the Nasdaq index down 27.81 points, or 2.23 per cent, to 1,221.70.

In the bond market, the key 30 year Treasury bond slipped 4/32 of a point. Its yield, which moves in the opposite direction to the price, rose to 7.10 per cent from last Thursday's close of 7.09 percent.

The rise in the bond's yield extended an upward creep that has become a pressing burden for stocks and has some questioning whether rates will level off anytime soon.

Bond yields above 7 per cent tend to draw money away from stocks and into bonds.

"If (the bond yield) was a stock we would buy it," said Mr Gary Kaltbaum, technical analyst at JW Charles Securities.

Wall Street will face a more important report today, when the National Association of Purchasing Management releases its March survey.

The other important economic indicator due this week will be Friday's monthly payroll, wage and unemployment figures.

Analysts said some of the selling bore the earmarks of portfolio window dressing by managers leery of showing large stock holdings in the uncertain climate.

Today was the last day of the quarter and it looked like we got some reverse window dressing," said Mr Peter Canelo chief investment strategist at Dean Witter.

"All of a sudden nobody wants to show they own any stocks," he said.

Analysts warned that brokerage stocks were particularly hard hit among financials dealings.

They said that this was yet another sign of the ailing market sentiment.