Edgy Investors Fuel Stock Market Volatility

Stocks swung wildly on Wednesday as investors first staged a love-in, then a strike, on government reports on inflation and consumer spending.

The Dow Jones industrial average ended 32.52 lower at 7,928.32, but that small closing decline doesn’t begin to tell the day’s story.

The blue-chip index charged higher by almost 80 points and plummeted to down more than 80 points in the first hour of trading, then jerked between negative and positive territory for the rest of the session.

It was a sign of just how edgy traders have become since the Dow and broader market indicators all hit record heights just one week ago. The comforting outlook of strong growth in corporate profits accompanied by low inflation and low interest rates has been challenged since then and interest rates in the bond market have been climbing since hitting a 17-month low at the end of July.

David Shulman, Salomon Brothers’ market strategist, said that with stocks selling at a very high 21 times earnings, the market is too richly valued to sustain even a hint of higher interest rates.

“Stocks have been trading nervously since we got this backup in rates” that began in the bond market on August 1, Shulman said, when the government reported a drop in the nation’s unemployment rate.

On Wednesday, declining issues were about even with advancers on the New York Stock Exchange, where closing volume was moderately heavy at a revised 587.23 million and well ahead of Tuesday’s pace.

Some of the stocks that moved substantially or traded heavily Wednesday:

NYSE

Micron Technology fell 7-1/8 to 42-5/8.

Texas Instruments fell 2-1/2 to 119-3/8.

Shares of these companies, which make dynamic random access memory chips, or DRAMs, dropped as Merrill Lynch and three other firms cut their earnings estimates for Micron following a meeting with management on Tuesday.

Boeing Co. rose 1-9/16 to 58-1/16.

The aircraft maker received a $70.7 million order from the Immigration and Naturalization Service for 45 MD 600N helicopters. Smith Barney upgraded the stock to buy from neutral.

Columbia/HCA fell 1-5/16 to 32-3/4.

Federal prosecutors have declared Columbia is a target of the ongoing investigation into whether the company defrauded the government.

NASDAQ

Intel Corp. rose 1-1/16 to 96-3/8.

Turning up the heat in a legal dispute with Digital Equipment Corp., Intel filed a countersuit against Digital Equipment Corp., alleging that Digital violated 14 of Intel’s patents on technologies ranging from microprocessors to portable computers.