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Dow Drops 15 as Late Selloff Erases Advance

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From Times Wire Services

Stock prices dropped in late trading Monday, falling victim to the volatility that has pummeled the financial markets recently.

The Dow Jones index of 30 industrial stocks closed down 15.00 points at 2,307.30.

The Dow Jones index was up about 40 for much of the session before the market suffered what Jack Solomon, an analyst at Bear, Stearns & Co., called “a straight-line collapse” in the last hour.

“Volatility is built into the structure of the market right now,” Solomon said, predicting that the uncertainty would continue.

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Advancing issues were slightly ahead of decliners, with 805 stocks up, 770 down and 403 unchanged on the New York Stock Exchange.

Big Board volume totaled 203.66 million shares, against 161.88 million on Friday.

Analysts said the stock market took its strength from the dollar, which was up against most foreign currencies, and then lost ground because of a sharp drop in the government bond market.

In recent weeks the stock market has tied its fortunes to those of the dollar and Treasury bonds. The dollar’s steep decline has raised fears of interest rate hikes in both the bond and stock markets.

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In the credit markets in late trading, the Treasury’s bellwether 30-year bond fell 2 points, or about $20 for every $1,000 in face value, from late Friday. Its yield rose to 8.79% from 8.60%.

Among tax-exempt municipal bonds, general obligations fell 1 points and revenue bonds were down 1 point in moderate trading.

Meanwhile, the federal funds rate, the interest on overnight loans between banks, traded at 6.875%, up from 6.75% on Friday.

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Analysts said bond dealers apparently were spooked by a sharp increase in commodities prices at a time when the dollar’s value was stabilizing.

Prices for both metals and grains moved higher, and the Commodities Research Bureau index, a general measure of all commodities, posted its biggest one-day increase in a decade.

“It suggests a severing in the linkage between the foreign exchange value of the dollar and commodity price developments,” said William Sullivan of the investment firm Dean Witter Reynolds.

Previously, prices for commodities rose as the value of the dollar declined. Sullivan said price acceleration in the absence of significant movement in the dollar indicated that commodities may be operating “in a world of their own.”

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