U.S. stocks fell for a second day as an agreement by major industrialized nations to help South Korea pay its debts failed to persuade investors that U.S. corporate profits will be unscathed by a slowdown in Asia.
The Walt Disney Co. and other companies that derive much of their earnings internationally led the decline.
In an abbreviated trading session, the Dow Jones Industrial Average fell 31.64, or 0.4 percent, to 7,660.13. The Nasdaq Composite Index fell 10.38, or 0.7 percent, to 1,499.53, and the Standard & Poor's 500 Index dropped 6.42, or 0.7 percent, to 932.70.
"The plan is a pittance," said Wayne Nordberg, a money manager and partner at Lord, Abbett & Co. in New York, which oversees $26 billion. "This is still going to be a long-term, painful workout, and the implications for earnings of U.S. companies are just beginning to be seen."
Traders and investors attached little significance to today's ups and downs. Many investors were at home celebrating the Christmas holiday, and many mutual funds are waiting until 1998 to place new bets.
"Right now, this is a trader's market," Nordberg said.
Although the Dow is off from its August highs, the stock market delivered returns better than what just about every analyst expected this year. The Dow is up 19 percent in 1997, the Nasdaq is up 16 percent and the S&P 26 percent.
Merrill Lynch & Co. fell 1 3/8 to 67 3/1 6 after 30 brokerage firms agreed to pay $910 million to settle an investor class-action lawsuit alleging that they colluded to fix prices on the Nasdaq Stock Market, according to an attorney for the plaintiffs.
Disney declined 2 1/2 to 95. Among others dragging down the Dow, Merck & Co. fell 3 3/1 6 to 101 1/4 , J.P Morgan & Co. lost 1 1/8 to 110 3/4 and Goodyear Tire & Rubber Co. lost 7/8 to 61 5/1 6.
Microsoft Corp. fell to a six-month low amid concern that the software publisher battle with the U.S. Department of Justice will pinch profits. In a report this week, Goldman, Sachs & Co. foresees "a cloud over the stock over the next several months." Microsoft fell 4 3/8 to 118 1 5/1 6, its sixth straight decline.
Overseas, the South Korean KOSPI index of 775 companies fell 4 percent. Hong Kong's Hang Seng Index fell 0.3 percent, while Japan's Nikkei Index gained 0.9 percent. Britain's FT-SE 100 Index fell 0.7 percent, France's CAC 40 rose 0.6 percent and Germany's DAX rose 0.2 percent.