FINANCIAL MARKETS : Earnings Worries Push Dow Down 13.29
Market Overview
* Continued selling of classic growth stocks pushed the broad market lower. Another wave of corporate “pre-announcements” about weak second-quarter earnings also hurt sentiment.
* The dollar drove up to a 20-month high against the German mark. But the dollar’s momentum against the yen waned.
* Good demand at an auction of two-year Treasury notes helped keep long-term bond yields stable.
Stocks
Growth stocks in businesses such as retailing, casinos, restaurants and drugs were clipped again as investors worried about consumers’ fading willingness to spend.
Kmart deepened those fears by announcing that its second-quarter earnings will not meet expectations, in part because of sluggish spring sales.
Still, the Dow industrials finished with a loss of just 13.29 points, at 3,497.53. Losing issues just slightly outnumbered winners on the New York Stock Exchange, where trading volume rose to 259 million shares.
Analysts say that second-quarter earnings pre-announcements will probably keep the market in a lousy mood for the next two weeks. Until actual earnings reports appear in mid-July, “there’s nothing else to focus on,” said Alice Sadlo, analyst at McDonald & Co.
Among Tuesday’s highlights:
* Kmart fell 1 1/2 to 20 1/8 on its earnings forecast, pulling down other retailers with it. Penney fell 1 3/8 to 44 1/4; Sears lost 1 to close at 53 1/4; Woolworth sank 3/4 to 27 5/8; Ann Taylor slid 1 7/8 to 24 7/8.
* Others projecting lower earnings were Continental Medical Systems, which plunged 3 3/8 to 8 3/8; Outboard Marine, off 1 1/2 to 16 7/8; Chemical Waste Management, down 1 5/8 to 10 1/8, and its parent, WMX Technologies, off 2 3/8 to 33 1/8.
* Among restaurant issues, Lone Star Steakhouses tumbled 2 3/4 to 22, Fresh Choice sank 1 5/8 to 26 7/8 and McDonald’s eased 3/4 to 48 1/2.
* In the casino sector, Circus Circus slid 2 3/8 to 55 5/8; Hollywood Casinos dropped 2 1/2 to 20 1/2 and Casino Magic lost 2 1/4 to 24.
* On the plus side, steel stocks rallied after the government imposed anti-dumping duties on many foreign steel competitors. USX-U.S. Steel gained 1 3/4 to 43 1/2; Bethlehem Steel surged 1 1/4 to 19 1/2 and Inland Steel added 7/8 to 27 1/4.
* Financial stocks also advanced. Citicorp rose 1 1/8 to 29 1/4; Wells Fargo gained 2 3/8 to 105 3/4; First Interstate was up 1 1/8 to 60 1/8; Coast Savings jumped 1 1/4 to 14.
Overseas, Tokyo’s Nikkei index rose 325.87 points to 19,538.30, rebounding from the 592-point selloff Monday that was sparked by the political crisis in Japan.
In Frankfurt, the DAX index edged up 8.26 points to 1,698.08. In London, the FTSE-100 index rose 4.2 points to 2,907.6.
Currency
The dollar rose against European currencies but its advance against the Japanese yen slowed.
In New York, the dollar closed at 1.696 German marks, up from 1.688 marks Monday and its highest close since October, 1991.
The dollar also closed at 110.90 Japanese yen, just slightly higher than 110.65 yen on Monday.
Against the mark, the dollar forged ahead in European trading but ran into stiff technical selling at the day’s 1.7005-mark high. Dealers saw reluctance to take the dollar through the psychologically important 1.70-mark level.
Marc Chandler of the advisory firm IDEA noted that with Germany’s economy sliding and Japan’s political turmoil, “The dollar is rallying more by default.” He also said the advance could continue.
Other Markets
The Treasury’s sale of $16 billion in two-year notes went well and bolstered demand for bonds overall. The high yield on the two-year notes was 4.16%, down from 4.17% at the May 25 auction.
Elsewhere, the yield on 30-year T-bonds eased to 6.77% from Monday’s 6.78%.
In commodities trading, gold for current delivery slipped $1.40 an ounce to $368.60 an ounce on New York’s Comex; near-term silver fell 2.5 cents to $4.26 an ounce.
On the New York Merc, most oil prices were slightly lower as the July crude contract expired.
Market Roundup, D6
