Late Rebound Tempers Dow’s Steep Plunge

Alan Greenspan huffed and puffed about inflation and interest rates again, blowing the Dow Jones industrial average into a nearly 123-point tailspin, but bargain hunters confidently repaired much of the damage by Wednesday’s close.

The Dow hit its low for the session with about 90 minutes to go, but finished with a loss of just 55.03 points at 6,983.18.

The barometer of 30 blue-chip companies had plunged more than 101 points early in the session as bonds tumbled after another warning by Greenspan, the chairman of the Federal Reserve, that the market’s meteoric rise in recent months poses an inflationary risk.

A wave of bargain-hunting cut the Dow’s loss to about 30 before midday, but another sharp pullback in bond prices sent interest rates soaring in the afternoon, halting the stock market’s rebound.

Broad-market measures also faltered from a midday recovery, sliding sharply in the afternoon, but finished with relatively modest losses.

“Greenspan is trying to dampen the enthusiasm, to slow things down, which is healthy,” said Robert Freedman, chief investment officer for the John Hancock Funds in Boston. “The market cannot continue to go straight up.”

Declining issues outnumbered advancers by more than a 2-to-1 margin on the New York Stock Exchange, where volume was heavy at 566.31 million shares as of 4 p.m., up from 527.44 million in the previous session.

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

NYSE

McDonald’s, down 2-3/8 to 44-7/8.

Wendy’s International, down 1-1/2 to 20-3/4.

Grand Metropolitan PLC, down 1 to 30-5/8.

McDonald’s will ask its 12,200 U.S. restaurants to drop the price of the Big Mac sandwich to 55 cents from $1.90, The Wall Street Journal reported.

Lucent Technologies, down 3-5/8 to 55-1/8.

The telecommunications equipment company was downgraded to “neutral” from “outperform” by Smith Barney.

America Online, up 2-1/2 to 39-1/8.

The computer online service signed a deal with Tel-Save Holdings, a small long-distance telephone company to advertise the telephone service on AOL.

NASDAQ

Dell Computer, up 3-5/8 to 75-3/4.

The mail-order personal computer marketer reported a 170 percent jump in quarterly profits late Tuesday amid sharply higher sales.

Physician Corp. of America, down 1-5/16 to 3-13/16.

The Miami-based administrator of health benefits plans was ordered by a court to show why its troubled property and casualty unit shouldn’t be taken into receivership.