Stocks Give Back Much of Greenspan Rally

Stocks tumbled Thursday after the bailout of a large, troubled investment fund sent a chill down the corridors of Wall Street and left investors wondering who might be the next victim of the global economic turmoil.

“That was a wake-up call, unfortunately,” said Arthur Hogan, chief market analyst at Jefferies & Co. “It took some of the euphoria [over interest rates] out of the market.”

The Dow Jones industrial average lost 152.42 points, or 1.9%, to 8,001.99, erasing most of Wednesday’s 257-point rally after Federal Reserve Board Chairman Alan Greenspan hinted that the central bank will cut rates soon to stop Asia’s economic pain from spreading to the United States.

Hogan said investors were also unnerved by news that the House Judiciary Committee will vote on Oct. 5 or 6 on whether to launch a formal impeachment inquiry based on independent counsel Kenneth Starr’s report on President Clinton’s affair with a former White House intern.

In the broader market, declining issues led advances by a 2-1 margin on active volume of 805.9 million shares on the New York Stock Exchange.

Technology and banking stocks were hit especially hard, and the Nasdaq composite index, laden with tech issues, fell 39.93 to 1,720.34, a 2.3% decline. The Standard & Poor’s 500-stock index fell 23.37 to 1,042.72.

Despite strong overnight gains in Asian and European stock markets following Wall Street’s rally on Wednesday, U.S. stocks fell early on profit-taking, and the decline gathered speed as investors digested details of the $3.5-billion dollar bailout of Long-Term Capital Management.

The fund attributed its losses to volatility and shifts in emerging markets such as Russia and raised worries about a possible credit crunch.

“The market is somewhat spooked by what it learned of the details of the Long-Term bailout,” said Peter Coolidge, senior equity trader at Brean Murray & Co. “This is the kind of thing the market has been worried about--fallout from the emerging-market crisis.”

Treasury Secretary Robert Rubin said the threatened collapse of the hedge fund did not pose a danger to the economy, even though risks from turmoil abroad had increased.

In the bond market, the yield on the benchmark 30-year bond was unchanged at 5.16%.

Oil prices closed higher as traders worried that possible damage from Hurricane Georges as it closes in on Gulf of Mexico oil rigs and shipping operations could further reduce American oil stockpiles.

At the New York Mercantile Exchange, crude oil for November delivery closed 17 cents higher at $15.98 a barrel.

The American Stock Exchange index fell 3.78 points to 642.30.

The NYSE composite index of all listed common stocks lost 10.36 points to 516.59. The average share lost 82 cents.

The Wilshire Associates equity index--the market value of NYSE, American and Nasdaq issues--was 9,566.240, down 2.1%, or 200.990.

The Russell 2,000 index of smaller companies fell 5.75 points to 370.25.

The prospect of an economic booster shot from the Fed energized stocks Thursday in Japan, where the battered Nikkei average jumped 3%. In addition to fueling domestic borrowing and spending, lower U.S. rates would help ensure that the United States continues to serve as an economic engine for the rest of the world.

In Europe, Frankfurt’s DAX index fell 1.1%, London’s FTSE-100 fell %0.9, and Paris’ CAC-40 fell 1.2%.

Among Thursday’s market highlights:

* Bank and brokerage stocks took a beating. Travelers Group fell $3.31, or 7%, to $39.63, Citicorp shed $5.63 to $99.88, BankAmerica lost $5.25 to $60 and NationsBank fell $4.38 to $54.38.

* Airline stocks fell on concern that a slowdown in the U.S. economy will cut into airline profits, said Glenn Engel, an analyst with Goldman Sachs. Continental Airlines fell $1.75, or 4.4%, to $38.50. AMR, the parent of American Airlines, fell $2.44, or 3.7%, to $63.87; Delta Air Lines fell $3.44, or 3.2%, to $103.31; and US Airways Group fell $2.19, or 3.7%, to $57.75.

* Bergen Brunswig Corp. rose $1.25, or 2.5%, to $50.50 as the No. 3 U.S. drug wholesaler declared a 2-for-1 stock split, payable Dec.