FINANCIAL MARKETS : STOCKS : Dow Off 10.15 on News of Firms’ Weak Profits
Weak corporate earnings and a general malaise pushed stocks lower Thursday, ending a frail attempt at a midweek rally.
The Dow Jones index of 30 industrials dropped 10.15 to 2,920.79.
Declining issues held a slight edge on advances in nationwide trading of New York Stock Exchange-listed stocks, with 701 up, 778 down and 524 unchanged. Big Board volume was a moderate 155.04 million shares, down from Wednesday’s 163.53 million.
The decline snapped a two-day rebound after Monday’s 56-point drop in the Dow.
Investors remained wary amid a fresh round of earnings disappointments, and weakness in technology, tobacco and energy stocks.
Computer-driven sell programs also pushed stocks lower, though they rose off their lows in late-session bargain hunting.
“This is just the continuation of a shakeout from Monday,” said Robert Walberg, an analyst at MMS International. Gains in the prior two sessions were “minimal and on light volume. We definitely had some futures selling, but the weakness seemed to be confined to autos, oil and high tech.”
Microsoft, the big computer software maker, said it expects lower profit margins in 1991. The announcement “put a negative bent on high-tech stocks,” Walberg said.
Some analysts said the market was overreacting to earnings reports. But earnings aside, investors are keeping an eye on the ongoing budget-deficit negotiations, which could stretch into August. The White House said President Bush may ask Congress to stay in session next month to cut the deficit.
Market highlights:
* Microsoft slid 2 3/4 to 68 3/4 after its statement on profit margins. Other computer stocks also fell. IBM lost 1 5/8 to 113 1/8, Apple Computer slipped 7/8 to 41 3/8 and Cray Research fell 1 1/8 to 43 7/8. Compaq, which reported second-quarter earnings within the range of analysts’ estimates, fell 1 1/2 to 57 7/8.
* Eli Lilly tumbled 4 3/8 to 79 5/8. A second lawsuit was filed over alleged side effects of the firm’s antidepressant drug Prozac.
* Tobacco stocks dropped after the New Jersey Supreme Court ruled that warning labels mandated by federal law do not preempt failure-to-warn or liability claims. Philip Morris fell 1 3/4 to 47 1/4, Loews Corp. lost 2 1/4 to 105 1/2 and American Brands slipped 3 3/8 to 66 1/4.
* Weak energy stocks included Arco, off 1 5/8 to 124 1/8; Chevron, off 3/4 to 77, and Mobil, down 1 to 65.
* Many biotech stocks continued to surge, including Amgen, up 1 to 91 1/2; Immunex, up 2 3/8 to 35, and Cytogen, up 2 3/4 to 41.
* Delta Air Lines slipped 1 1/2 to 65 7/8 after it reported weaker-than-expected profit.
Stock prices also ended sharply lower on London’s Stock Exchange, with the Financial Times-Stock Exchange 100-share index down 20.6 points at 2,344.1. However, in Frankfurt, shares ended broadly higher, as strong buying of selected blue chips helped prices rise across the board. The 30-share DAX index ended 12.64 points higher at 1,932.89.
CREDIT
Bond Prices Close Nearly Unchanged Bond prices were virtually unchanged in lethargic trading as the market waited for progress on the federal budget and for today’s release of gross national product figures.
The Treasury’s benchmark 30-year bond ended the day unchanged, as did its yield, which stood at 8.54%.
Analysts said traders were unwilling to make any major moves while they wait for congressional and White House negotiators to agree on $50 billion in budget cuts.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8%, unchanged from late Wednesday.
CURRENCY
Dollar Ends Mixed, Gains Against Yen The dollar rose against the Japanese yen but finished mixed against most other major currencies in seesaw trading.
The dollar got a boost initially in Tokyo when traders began selling yen, which lost ground across the board. Analysts said investors remain concerned about recent stock market swings in Tokyo as well as uncertainty over whether the Bank of Japan will move to raise interest rates.
Higher interest rates in Japan would tend to support the yen.
Bob Morrissey, senior trader at the Bank of Boston’s New York office, said there were rumors that the Federal Reserve had entered the market to sell dollars and buy yen in an effort to stem the dollar’s rise. But those rumors were not confirmed.
In Tokyo, the dollar rose 0.98 yen to a closing 150.11 yen. Later, in London, it was quoted at 150.10 yen. In New York, the dollar closed at 150.35 yen, up from 149.83 Wednesday.
In London, the British pound rose to $1.8133 from $1.8125 late Wednesday. In New York, it cost $1.8145 to buy one pound, more expensive than Wednesday’s $1.8120.
COMMODITIES
Soviet Rumors Spur Soybean Price Rally Soybean futures prices surged in a rally fueled by perceptions that the Soviet Union is shopping for soybean meal after a months-long absence from world commodity markets.
Grain futures ended mostly higher as bullish enthusiasm spread from the soybean pits to the nearby wheat, corn and oat rings.
On other commodity markets, gasoline futures rose sharply; copper extended recent gains; precious metals were mixed, and livestock and meat futures were mixed.
Soybean futures settled 7 to 12 cents higher in Chicago, with the contract for delivery in August at $5.92 1/2 a bushel. Soybean meal futures settled 80 cents to $4 higher, with August at $171.10 a ton.
Wheat futures ended unchanged to 1.5 cents higher, with September at $3.0175 a bushel.
