Philip Morris, IBM News Lops 20.80 Off Dow
Market Overview
* Disappointing earnings news on two of the nation’s most widely held stocks--IBM and Philip Morris--drove the Dow Jones industrial average down 20.80 points to 3,1784.68, but the broader market rose.
* Bond yields edged up in thin trading.
Stocks
International Business Machines and Philip Morris, each a core holding in the portfolios of more than 1,000 investing institutions, became the latest Wall Street casualties of earnings disappointments.
Still, advancing issues outnumbered declines 12 to 11 on the New York Stock Exchange. Big Board volume came to 213.59 million shares, up from 175.90 million the previous session.
IBM stock fell 5 1/8 to a 10-year low of 72 7/8 after the company reported third-quarter operating earnings, before a big special charge, of 15 cents a share, down from 31 cents in the corresponding period last year.
The figure was far below analysts’ estimates, and IBM’s chairman, John Akers, acknowledged that it was “disappointing.”
Philip Morris tumbled 4 1/4 to 79 3/4 after reporting third-quarter earnings of $1.44 a share, up from $1.20 a share in the like period of 1991 but a shade below expectations.
Analysts also noted that Philip Morris projected a 10% decline in shipments of its domestic tobacco-product business for the fourth quarter.
Those two stocks accounted for almost all of the Dow’s decline.
“The market acted fine outside of those two stocks,” said Gerald Simmons, head of institutional trading at Interstate/Johnson Lane. “The market is not in bad shape at all.”
Government reports that the September consumer price index rose 0.2% and jobless claims dipped to 383,000 from an expected 404,000 had little influence on the market.
One analyst said there was still speculation that the Federal Reserve could cut interest rates before the November election.
Among the market highlights:
* Gerber Products fell 2 3/8 to 32 5/8 on top of a 2-point drop Wednesday, when the company estimated a lower quarterly profit.
* Kysor Industrial climbed 1 1/4 to 14 1/8. It reported a third-quarter profit more than double the like period last year.
* J. P. Morgan helped limit the Dow’s loss with a rise of 5/8 to 61 7/8. The bank holding company’s third-quarter profit was $2.01 a share, up from $1.72 a share before extraordinary items in the July-September period last year.
* Seagate Technology, among the NASDAQ volume leaders, gained 1 7/8 to 15 3/8. Late Wednesday the company reported an 86-cent-a-share quarterly profit, against a loss a year earlier.
* Chrysler rose 1 to 24 1/8. Bear Stearns raised its third-quarter estimate on the car company.
Overseas, stocks ended higher in Tokyo. The 225-share Nikkei average was up 284.46 points, or 1.64%, to 17,628.49.
London stocks were sharply lower amid deepening gloom about the economy. The 100-share Financial Times average fell 28.1 points, or 1.1%, to 2,546.6.
In Frankfurt, shares ended a roller-coaster session slightly lower. The 30-share DAX average lost 5.1 points to 1,453.43.
Credit
The price of the Treasury’s main 30-year bond fell 7/32 point, or $2.19 per $1,000 in face amount. Its yield, which rises when prices fall, was 7.51%, up slightly from 7.49% Wednesday.
The market was initially boosted by figures showing a little improvement in the labor market. The fact that there was a decline in new unemployment claims for the week ended Oct. 3 was a minor surprise, said Frederick Sturm, senior economist at Fuji Securities Inc. Many had expected the number of new jobless to increase.
But investors initially overreacted, partly because they’ve been disappointed by the lack of another interest rate cut. News that fewer people were seeking unemployment benefits seemed to make lower rates even more unlikely, Sturm said.
The federal funds rate, the interest on overnight loans between banks, fell to 3.375% from 4.50% Wednesday.
Currency
The dollar fell against most major currencies as economic data kept traders pessimistic about the economy.
Bruce Steinberg, a senior economist at Merrill Lynch, said economic indicators released Thursday were less than positive.
“Probably the weight of evidence showed the economy remained pretty weak” and dollar trading was affected by that, Steinberg said.
“Therefore the Fed was more likely to ease as not,” he added, speaking about the Federal Reserve Board’s inclination to lower interest rates. Speculation has gone back and forth on that possibility for weeks.
“The Fed has left people scratching their heads about what is going on,” Steinberg said.
In New York, the dollar settled at 120.25 Japanese yen, down from Wednesday’s 121.02, and 1.453 German marks, down from 1.461.
The British pound fell to $1.695 from $1.707.
Commodities
Heating oil and natural gas futures prices rose sharply on the New York Mercantile Exchange amid mounting speculation that this winter will be the coldest in years.
Crude oil and gasoline futures also advanced, led by the strength in heating oil.
On other commodity markets, precious metals fell; grains and soybeans retreated, and livestock and meat futures were mostly higher.
Natural gas for November delivery soared 10.6 cents to $2.432 per 1,000 cubic feet.
November light, sweet crude oil rose 25 cents to $22.33 a barrel.
October gold fell $1.80 to $341 an ounce, and December silver fell 0.5 cent to $3.702 an ounce on New York’s Commodity Exchange.
