NEW YORK -- Stocks plunged Monday as optimism about corporate earnings gave way to jitters about rising interest rates and their impact on profit growth.
The Dow Jones industrial average fell 243.54 to close at 11,008.17, its steepest loss since Jan. 4, when it lost 359 points. The selloff was broad-based, with 27 of 30 Dow component stocks finishing lower. General Electric, down 6 to 138 1/8, and Johnson & Johnson, down 6 3/16 to 83 11/16, led the decline.
Broader stock indicators also fell in a volatile session. The Nasdaq plummeted 139.32 points to close at 4,096.08, its worst point drop since it fell 150 points Jan. 5, and its fourth-biggest point decline ever. The Nasdaq had risen as much as 67 points in early trading.
The Standard & Poor's 500 fell 39.83 to 1,401.53 and the Russell 2000 index of smaller companies fell for the first time since Jan. 12, losing 10.99 to close at 522.95.
After a strong opening, stocks began to slide at midday as investors looked ahead to the next meeting of the Federal Reserve on Feb. 1 and 2. Many on Wall Street now fear that an interest rate increase at that meeting will be the first of several this year as the central bank works to stave off inflation.
In 1999, the Fed raised interest rates three times, hoping to keep inflation under control. While most economists see little evidence of inflation now, continued signs of economic strength have convinced some that inflation could escalate at any time.
On Monday, Federal Reserve Bank of Atlanta President Jack Guynn acknowledged that last year's rate increases had little effect on economic growth.
"There is no broad-scale evidence to show that those three increases have done anything to dampen consumer demand," he said, although he noted that it takes several months to see the full impact of rate increases.
Guynn's comments unnerved investors a day before Fed Chairman Alan Greenspan's planned testimony before a Senate committee about the federal budget. While Greenspan is not expected to specifically address interest rates, Fed watchers will carefully monitor his comments for any signs of the central bank's course, analysts said.
"It's become a foregone conclusion that interest rates are on the rise, and no matter how much, that hurts investors' psyche," said Arthur Hogan, chief market analyst at Jefferies & Co.
The broadness and the depth of the selloff suggested that other factors influenced the market on Monday. Traders said some investors sold stocks to collect profits from a solid rise in the Nasdaq last week. Cisco Systems fell 6 3/16 to 109 1/16 and Sun Microsystems dropped 5 5/16 to 79 1/8.
Also, Hogan said, investors are greeting Corporate America's strong earnings reports with a pessimistic eye.
"There's a lot of speculation about whether these numbers will be repeatable," he said. Companies in the S&P 500 are expected to report average profit growth of 20 percent for the fourth quarter, and those numbers will become especially tough to match if interest rates continue to rise.
Strong corporate earnings prompted some investors to buy. Eastman Kodak rose 1 5/16 to 62 1/16 after reporting it earned $1.27 per share in the fourth quarter, beating analysts' estimates of $1.24. Kodak, which has faltered in recent years due to tougher competition from Fuji, also issued a strong outlook for 2000.
Procter & Gamble edged up 3/16 to 102 7/8 after calling off talks to acquire drug makers Warner-Lambert and American Home Products. Procter & Gamble's stock price had tumbled 17 percent since rumors of a deal emerged last week, as shareholders believed the company would have had to issue significant amounts of new stock to pay for the deal.
Time Warner, fresh from its $145 billion merger with America Online, fell 3 1/2 to 87 5/8 after announcing plans to merge its music business with British music company EMI Group PLC.
Declining issues outnumbered advancers by a 2-to-1 margin on the New York Stock Exchange. On the Nasdaq, decliners led by a 4-to-3 margin.
NYSE consolidated volume totaled 1.38 billion shares, compared with 1.46 billion in the previous session. The Nasdaq had its busiest session ever, with 1.97 billion shares changing hands.
Overseas, Japan's Nikkei stock average rose 1.0 percent. Germany's DAX index fell 0.9 percent, Britain's FT-SE 100 gained 0.5 percent, and France's CAC-40 closed 0.2 percent higher.