Dow Dips 6.69 as Profit Jitters Hold Sway : Market Overview
* The stock market eased on new evidence that the economy is still struggling. The Dow Jones industrial average, up about 10 points in early trading, finished the day down 6.69 points at 3,284.01.
* Bond yields dropped and the dollar plunged after the government reported an unexpectedly high jump in the number of people filing for unemployment benefits.
Stocks
New warnings about second-quarter earnings encouraged many investors to stay away from the market, traders said.
The software field became the latest sector to fall prey to profit concerns after Lotus Development said second-quarter and 1992 results won’t meet goals. Lotus stock plummeted 5 5/8 to 18 3/8.
“People are still very much concerned about earnings as they come out,” said Bill Raftery, analyst at brokerage Smith Barney. A host of companies have warned in recent days that second-quarter results won’t look good, and many have cited the slow economy.
Meanwhile, the Labor Department said initial claims for unemployment benefits rose 16,000 in the week ended June 13. Analysts had expected a small decline, so the news added to concerns that the economy is weakening.
Despite the bad news, winners topped losers 845 to 797 on the Big Board. Volume was 182.96 million shares against Wednesday’s 193.85 million.
Analysts said some institutional investors appeared to be adding industrial stocks to their portfolio--even in the face of gloomy economic reports--on the belief that those stocks still have the best potential in the months ahead.
Among the market highlights:
* The software profit scare spilled over from Lotus. Microsoft fell 2 1/4 to 70, Borland lost 1 1/4 to 39 1/4, Learning Co. dropped 2 1/4 to 11, Quarterdeck eased 3/4 to 11, and Autodesk gave up 1 3/4 to 35 1/2.
* Technology stocks in general weakened further. Rainbow Technologies fell 1 1/2 to 13 1/2, Xircom slid 3/4 to 8 1/4, Conner Peripherals lost 1/2 to 18 3/8, and Sun Microsystems was down 7/8 to 23 7/8.
* British Petroleum plunged 6 to 48 3/8 on word that its CEO had resigned. Traders cited concerns that the company’s dividend could be cut or eliminated. Most other major oil stocks also closed lower.
* Atlanta-based T2 Medical plummeted 5 to 21 1/2. The company, one of last year’s high-flyers among health care companies, said a grand jury had requested documents in a probe of home infusion therapy centers such as those owned by T2. The centers often are part-owned by physicians, who may refer their own Medicare patients to the centers. The probe apparently focuses on potential abuse of the referrals.
* On the plus side, insurance stocks continued to gain, though analysts were at a loss to explain the rise. AIG added 1/2 to 89 1/2, GEICO surged 2 3/4 to 55 5/8, Transamerica rose 1 1/2 to 43 5/8, and Conseco leaped 3 1/4 to 24 1/8.
* Industrial stocks moving up included Georgia-Pacific, up 1 1/4 to 60 1/2; Air Products & Chemicals, up 1 7/8 to 43; Snap-On Tools, up 1 to 30 1/4, and ITT, up 1 to 64.
* Among Southland issues, engineering firm Dames & Moore tumbled 2 1/8 to 15 3/4 after saying this quarter’s profits will probably be below expectations. It cited the slow California economy.
Homebuilder Kaufman & Broad added 1/2 to 13 5/8 after reporting flat quarterly earnings. Retailer Price Co. slipped 1/4 to 32 3/4 on its report that operating earnings fell 6% in the recent quarter. It also warned of further weakness ahead.
Overseas, Tokyo shares rose amid renewed talk of a possible interest rate cut. The Nikkei average added 290.05 points to 16,143.72.
Stocks also rebounded in London, where the Financial Times 100-share average rose 24.7 points to 2,557.3. In Frankfurt, the DAX index slipped 3.60 points to 1,764.89. And in Mexico City the roller-coaster ride continued, as the Bolsa index gained 37.21 points to 1,599.92.
Meanwhile, the red-hot Hong Kong market soared anew. The Hang Seng index jumped 113.48 points to 6,078.69 on a new dose of economic optimism.
Credit
Bonds yields dropped as weak economic reports bolstered the case for another Federal Reserve interest rate cut.
The price of the Treasury’s 30-year bond gained 17/32 point, or $5.31 per $1,000. Its yield declined to 7.78% from 7.82% Wednesday. Short-term rates also fell.
The jobless-claims report took the market by surprise, analysts said, but rumors were circulating even before that indicated that the Fed was indeed preparing to ease rates. There also were rumors that major banks were buying Treasury bonds--which would suggest growing expectations of a rate cut.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.813%, up from 3.750% Wednesday.
Currency
The dollar was driven sharply lower by the bad economic news, made worse by the rail strike that could further hurt the economy.
The dollar plunged to 1.538 German marks in New York, down from 1.550 Wednesday. It also closed at 125.15 Japanese yen, down from 126.45.
Rumors swept the market that the Federal Reserve was checking price levels of the Japanese yen. If true, that would indicate the central bank is poised to intervene in the market to support the dollar.
Commodities
Soybean futures prices surged on the Chicago Board of Trade on renewed fears of hot, dry weather in the Midwest, where spring rainfall is far below normal.
Elsewhere, energy futures tumbled on the New York Merc, partly reflecting reports of larger-than-expected U.S. supplies. Light, sweet crude oil for August dropped 31 cents to $22.58 a barrel.
June gold added 40 cents to $343.20 an ounce, and July silver fell 2 cents to $4.00 on the Comex.
