Canada: Toronto Stocks down 500 points on Friday: More on way experts fear, as markets melt down

By Madhavi Acharya Toronto Star Business Reporter

North America's major stock indices plummeted yesterday, capping the worst week on the markets since the October, 1987, crash.

Driven by word yesterday that the U.S. economy is hotter than ever - dramatically raising the threat of inflation and higher interest rates - investors hit the panic button.

Call it Friday the 14th.

``If you could smell fear, this was the week when it stunk,'' said Jeff Cheah, an analyst at Standard & Poor's MMS in Toronto.

But experts say the worst may be yet to come.

``There's a growing sense in the market that we're about to see something very awful happen,'' said Rob Palombi of Standard & Poor's. ` `People feel that the volatility in global markets is not over and things may yet get worse before they get better.''

After the 1987 crash, however, most markets recovered in a matter of months.

But, for the fifth straight day, technology stocks bore the brunt of the damage. The Nasdaq, home to Internet and other high-tech companies, lost nearly 10 per cent of its value yesterday, its third-worst day ever, in point terms.

Even the blue-chip Dow Jones industrial average was caught in the selling vortex, shedding more than 600 points.

In Toronto, the TSE 300 Index lost nearly 500 points to close at 8473.51, miles from its peak of 10,052.68 in late March.

Many analysts say the markets were due for a period of decline, given the recent skyrocketing values, particularly in high-tech stocks.

It was a bubble waiting to burst, said Fred Ketchen, director of equity trading at ScotiaMcLeod in Toronto. ``In the long run, this is probably good medicine for a market that got a little too ahead of itself.''

The Canadian dollar was hit, sinking to its lowest since December, recovering to close at 67.73 cents (U.S.).

Stock market declines earlier in the week left a lot of investors with a bad taste in their mouths and the higher-than-expected inflation figures gave them a reason to sell, said John Kinsey, a portfolio manager at Caldwell Securities Ltd.

The U.S. Labor Department reported yesterday that, excluding volatile food and energy prices, consumer prices rose 0.4 per cent in March, twice what analysts were expecting.

That puts prices up 3.7 per cent from a year ago, a figure that suggests the U.S. economy may be growing too fast for its own good. As a result, investors are now convinced that the U.S. Federal Reserve will soon hike interest rates.

http://www.thestar.com/editorial/news/20000415NEW01_CI-STOX15.html

-- Carl Jenkins (Somewherepress@aol.com), April 15, 2000