FINANCIAL MARKETS : Earnings Reports Push Dow Down 7
Disappointing earnings reports pushed blue-chip stocks lower Wednesday, but continued strength in technology issues nudged broader market indexes higher--including the Nasdaq composite index, which went back over the 1,000 mark.
The Dow Jones industrial average declined 7.39 points to 4,707.06. The blue-chip index turned direction after two days of strong gains that had given investors some hope that last week’s 67.27-point loss was an anomaly.
Blue-chip stocks also came under pressure from the bond market. The 30-year Treasury yield rose to 6.88% from 6.82% late Tuesday, after an auction of 5-year notes.
Despite the loss in the Dow, the market’s tone was upbeat.
“There’s such strong momentum in the market, it’s not easy to unravel so quickly,” said Steven Goldman, market strategist at Weeden & Co. “We’ll hit these little air pockets.”
“The market is more resilient than it looks, the losses in DuPont and 3M are the Dow’s whole decline,” said Michael Metz, market strategist at Oppenheimer & Co.
Minnesota Mining & Manufacturing shed 3 3/8 to 56 1/8 and DuPont lost 2 3/4 to 68 1/4 after both companies reported quarterly earnings that were below Wall Street’s expectations.
Together, 3M’s and DuPont’s losses dragged the Dow index down by more than 17 points. If they had not fallen so sharply, the Dow would have ended higher, traders pointed out.
Bethlehem Steel, another Dow index component, also lost ground, dropping 7/8 to 15 3/4, on a report of lower-than-expected increase in earnings.
“These are the first three disappointments in big-name stocks that we’ve seen, all in the Dow, and bonds, which were better, have started to turn down,” noted Steven Kroll, managing director at Monness Crespi & Hardt.
Advancing issues led decliners by 6 to 5 on the New York Stock Exchange. Big Board volume was heavy at 399.24 million shares, up from 373.20 on Tuesday.
The Standard & Poor’s 500-stock index rose 0.51 to 561.61. The Nasdaq composite index climbed 6.43 to 1,000.18. The Russell 2,000 index of small-capitalization stocks rose 1.40, or 0.48 percent, to a record 296.10.
Among the market highlights:
* A big winner was Amgen, which rose 4 3/8 to 84 1/4 on news that the company’s initial clinical trials of an obesity protein produced major weight losses in obese mice.
* Disney shares helped blunt the Dow’s losses, rising 1 1/8 to 56 7/8, after the entertainment conglomerate said its third-quarter net earnings were 60 cents per share, well above the 49 cents reported last year and exceeding analysts’ expectations of 56 cents.
* Procter & Gamble, another Dow component, added 1 3/4 to 69 3/4. The company said it had asked the federal government to approve its new antibacterial treatment for ulcers.
* Computer stocks ended mixed after putting in a strong morning. IBM rose 5/8 to 109 after the company on Tuesday approved an additional $2.5 billion in stock repurchases. Compaq fell 1/8 to 51 3/8 on the Big Board. In Nasdaq trading, Novell fell 1/2 to 18 1/4, Intel lost 7/8 to 68 1/8, and Microsoft slipped 3/8 to 96.
* MCI advanced 1 5/16 to 22 3/8 after Bear Stearns commenced coverage of the stock with a “buy” rating.
* Major foreign exchanges closed higher. Tokyo’s Nikkei average closed up 238.85 points or 1.48% at 16,387.25. London’s FTSE-100 gained 21.4 points to close at 3,454.3 and Germany’s DAX index ended up 11.75 points at 2,240.81.
However, in Mexico, the Bolsa index fell below 2,400 points for the first time in three weeks after disappointing operating earnings were reported by telecommunications giant Telmex.
The dollar fell against most major currencies but nudged higher against the Japanese yen in U.S. trading. In late New York trading, the dollar was quoted at 1.3873 German marks, down from 1.3935 late Tuesday. The dollar also was changing hands in New York at 87.82 Japanese yen, just up from 87.71.
Oil prices jumped Wednesday on an unexpected sharp drop in domestic inventories of crude oil and a fall in heating oil supplies. Prices have fallen 16% since May as the market overcame concerns about shortages. Crude oil stocks dropped 7.25 million barrels last week and now stand nearly 22 million barrels lower than a year ago at this time, according to a report late Tuesday from the American Petroleum Institute.
At the New York Mercantile Exchange, September crude soared 57 cents to $17.50 a barrel and August heating oil rose 1.53 cents to 48.04 cents a gallon.
