Dow Tumbles 119 Points, Falls Below 8,000

The Dow Jones industrial average slid nearly 120 points Thursday as fears of a trade war with Japan added to a growing skepticism about future company profits.

The Dow Jones industrial average fell 119.10, or nearly 1.5 percent, to 7,938.88, swinging from an early 55-point gain to a 161-point loss before recovering somewhat.

After finally pushing back above 8,000 just two weeks ago, the blue-chip barometer is now more than 300 points shy of its Aug. 6 peak at 8,259.31.

Sears Roebuck and Merck led the retreat, falling the equivalent of 40 Dow points after issuing a warning Thursday that credit delinquencies could cast a shadow over fourth-quarter earnings.

Broader stock measures also turned sharply lower despite a report showing that retail inflation remained subdued in September even with another sharp increase in energy costs. In sharp contrast with recent trends, smaller-company shares dove sharply with the blue chips.

“Any hint of a trade war is bound to be negative for stocks, but this seems to be a bit of an overreaction,” said Jeffrey Applegate, chief investment strategist at Lehman Brothers, describing Thursday’s events as more a matter of posturing than anything substantive.

Declining issues outnumbered advancers by a 12-to-7 margin on the New York Stock Exchange, where volume totaled a hefty 595.98 million shares as of 4 p.m., up from 504.68 million on Wednesday.

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

NYSE

Coca-Cola, down 7/8 at 58-15/16.

The soft drink giant reported a 5 percent increase in earnings for the third quarter, crediting strong international sales growth. The results matched Wall Street expectations.

Sears Roebuck, down 5-13/16 at 48-1/16.

The second-biggest U.S. retailer reported a 26 percent improvement in third-quarter profits, beating forecasts, but warned that increasing consumer credit delinquencies are likely to impact its holiday results.

Compaq Computer, down 4 at 73-1/4.

The Houston-based company exceeded analyst projections with a 42 percent jump in third-quarter profits, citing a new low-price strategy that has boosted computer sales. The stock had rallied on Wednesday in advance of the report.

NASDAQ

MCI Communications, up 1-1/4 at 38-1/8.

WorldCom, down 11/16 at 34-3/4.

GTE (NYSE), down 3 at 45.

The stocks traded actively again after late Wednesday’s bid by GTE to top WorldCom’s hostile offer to acquire MCI.

Apple Computer, down 2-5/16 at 21-1/2.

The computer maker lost a worse-than-expected $161 million in its fourth quarter ended Sept. 30. Revenues fell 30 percent from a year ago.