Wake-Up Call Derails Stock Market Rebound

Just as the Dow Jones industrial average was set to rejoin the market’s record-setting march, Alan Greenspan weighed in with another stern inflation warning, sending stocks and bonds to sharp losses on Wednesday.

The Dow, which on Tuesday moved about 80 points shy of its first record high in two months, closed with a drop of 83.25 to 8,095.06 after sliding by as much as 127 points earlier in the day.

The Nasdaq market edged to its fifth straight closing high amid some strength in bellwether technology issues.

But most broad-market measures pulled back sharply from Tuesday’s records as the latest congressional testimony by Greenspan, the Federal Reserve chairman, derailed a month-long rally in the bond market.

Greenspan, noting the near-perfect economic conditions that have fed this bull market, told the House Budget Committee that it may be only a matter of time until the strong job market forces employers to boost wages - and prices - as they try to keep up with consumer demand.

It was a rude awakening in the financial markets, where there’s been little fear that the Fed might try to protect against inflation by slowing the economy with a boost in the central bank’s key lending rates.

Declining issues outnumbered advancers by a nearly 2-to-1 margin on the New York Stock Exchange, where volume was heavy again at 572.27 million shares as of 4 p.m., up from Tuesday’s 551.41 million.

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

NYSE

Gateway 2000, up 4-3/16 at 34.

Prudential Securities upgraded its rating on the computer maker, calling Gateway a likely takeover target, the Dow Jones News Service reported.

Delta & Pine Land, up 4-3/4 at 43-1/8.

The seed producer’s shares surged amid rumors the company will be acquired for $40 a share, the Dow Jones News Service reported, citing an analyst at BioScience Securities.

Jostens, down 2-13/16 at 24-13/16.

The school ring and photography company warned that it will post a wider-than-expected third-quarter loss. Jostens cited higher than anticipated infrastructure costs and untimely September expenses.

NASDAQ

Applebee’s International, down 2-1/4 at 22-3/8.

The restaurant operator warned late Tuesday that it will post disappointing third-quarter profits. Applebee’s cited costs for a menu initiative, as well as disappointing results from locations open at least a year and Rio Bravo Cantina.

Rational Software, down 3-5/16 at 11-1/2.

The company advised analysts to lower revenue growth expectations for the fiscal years ending March 1998 and fiscal 1999, the Dow Jones News Service reported, citing an analyst at Cowen & Co.