Investors Dump Stocks; Dow Plunges 49.86

Stocks fell sharply Thursday, as the Mexican peso tumbled and U.S. interest rates shot higher.

The Dow Jones industrial average fell 49.86 to 4,703.82, back to a closing level it had last seen on Sept. 8. At one point, the stock market’s best-known indicator was down as much as 86 points before paring losses.

On the Big Board, declining issues led advancers by 3 to 1. Volume was heavy at 464.18 million shares as of 4 p.m., up from 433.58 million on Wednesday.

Analysts said a combination of factors led to the darkening mood on Wall Street. In addition to worries that corporations cannot keep up the impressive earnings gains that have been reported so far this year, the market was rattled by budget squabbling in Congress and political unrest in Mexico.

And while many investors had viewed previous dips in stock prices as buying opportunities, this time they were anxious to take their profits and get out, said Philip Roth, a technical analyst at Dean Witter Reynolds Inc.

“For the first time, people are worried that declining prices are going to mean more declining prices, rather than the opposite. I think the most important element is that people have had tremendous profits, and they want to lock them in.”

Some of the stocks that moved substantially Thursday:

NYSE

First Interstate rose 4-1/8 to 124-5/8.

Wells Fargo rose 1-1/8 to 208-3/8.

Courting alternative offers to Wells Fargo’s $10 billion hostile bid, First Interstate has opened its books to Banc One and Norwest, The Wall Street Journal reports. S.G. Warburg upgraded First Interstate’s stock to “hold” from “sell” to reflect the possibility that another company will make a bid for the bank.

Toys R Us fell 7/8 to 22-1/4.

The company announced a franchise agreement with TOP-TOY A/S, the leading Scandinavian toy retailer. Under the agreement, eight of TOPTOY’s SUPERLEG stores will be converted to Toys “R” Us stores bringing the total number of Toys “R” Us stores in Scandinavia to 12.

NASDAQ

Pyxis fell 5 to 11-3/4.

The company, which makes drug-delivery systems, reported disappointing third-quarter earnings and the resignation of its president and chief executive.

AMEX

Hasbro, up 3/8 at 29-3/4.

The Pawtucket, R.I. toy maker on Wednesday announced the formation of an interactive game and software division.