FINANCIAL MARKETS : Earnings Reports Halt Dow’s Rally
Disappointing earnings reports from some key blue-chip companies clipped the Dow Jones industrial average Wednesday, though the broad market continued to advance.
In the bond market, renewed selling sent long-term yields higher in the aftermath of the Treasury’s sale of new five-year notes.
On Wall Street, the Dow eased 7.39 points to 4,707.06, halting a two-day surge.
The Dow was hurt as component stocks DuPont and 3M slumped in the wake of second-quarter earnings reports that were below expectations.
DuPont tumbled 2 3/8 to 68 1/2 and 3M sank 3 1/2 to 56.
However, gains in other key Dow stocks offset those declines, limiting the index’s slide.
In the broad market, winners topped losers by 12 to 10 on the Big Board in active trading.
The Nasdaq composite index of mostly smaller stocks rose 6.43 points to 1,000.18, nearing the all-time high of 1,005.89 set July 18.
The Russell 2,000 index, a pure proxy for small-company issues, added 1.40 points to 296.10, a new record.
Indeed, despite the setback in the Dow, the market’s tone was upbeat, analysts said. “There’s such strong momentum in the market, it’s not easy to unravel so quickly,” said Steven Goldman, strategist at Weeden & Co. “We’ll hit these little air pockets” from time to time, he said.
Even so, some traders were disappointed that the bond market’s two-day rally ran out of steam. The yield on the 30-year Treasury bond jumped to 6.88% from 6.82% on Tuesday.
Analysts said the average yield of 6.22% on new five-year T-notes auctioned Wednesday was about as expected. But buying from investors in the secondary market, where newly auctioned notes are traded, subsided after the auction and helped depress bond prices in the afternoon.
Also, some traders were shaken after Federal Reserve Board Gov. Lawrence Lindsey denied that he favors a specific cut in interest rates by the Fed.
A Japanese newspaper had earlier reported that Lindsey said the Fed could cut short-term rates by another half a percentage point. A Fed spokesman called the Japanese report “incorrect.”
Among Wednesday’s highlights:
* Bethlehem Steel added to downward pressure on the Dow index, losing 7/8 to 15 3/4 after its quarterly earnings report also disappointed investors.
Along with DuPont and 3M, “these are the first three disappointments in big-name stocks that we’ve seen,” said Steven Kroll, managing director at Monness Crespi & Hardt.
* On the plus side, oil field services firm Halliburton jumped 1 3/8 to 40 1/4 on its earnings report. Other earnings winners included Phillips Petroleum, up 5/8 to 35 1/2; Walt Disney, up 1 1/8 to 56 7/8, and Cirrus Logic, up 3 1/8 to 44 1/8.
* Many consumer stocks advanced, perhaps benefiting from money coming out of industrial stocks such as Bethlehem and DuPont. Procter & Gamble jumped 1 3/4 to 69 3/4 after saying it will seek federal approval of its new antibacterial treatment for ulcers.
Other consumer gainers included Philip Morris, up 1 1/4 to 75 1/8; Clorox, up 1 5/8 to 65 5/8; PepsiCo, up 1 to 46 5/8, and Nike, up 1 to 88 7/8.
* Amgen led a big advance in many health care stocks, surging 4 3/8 to 84 1/4 after saying that its initial trials of an anti-obesity protein produced major weight losses in obese mice.
Also gaining were Genzyme, up 1 5/8 to 45 1/2; Mentor Corp., up 2 3/4 to 32 1/8, and Alza, up 7/8 to 24.
* Tech stocks were mixed. IBM added 5/8 to 109 after the company on Tuesday set an additional $2.5 billion stock repurchase plan.
Also rising were Davidson & Associates, up 4 to 47 3/4; Oracle, up 2 to 42 1/4, and Altera, up 2 1/4 to 34 1/4. But Intel eased 7/8 to 68 1/8 and Computer Associates was off 1 at 69 1/8.
* MCI surged 1 5/16 to 22 3/8 after Bear Stearns commenced coverage of the stock with a “buy” rating.
In foreign trading, Mexico City’s Bolsa index tumbled 76.10 points, or 3.1%, to 2,379.21 as investors registered their disappointment with Telmex’s midyear earnings report. In NYSE trading Telmex dropped 1 1/4 to 33 5/8.
In Tokyo, the Nikkei-225 index rebounded 238.85 points to 16,387.25.
In commodities trading, oil prices rebounded on an unexpectedly sharp drop in domestic inventories of crude oil.
Crude oil inventories dropped 7.25 million barrels last week and now stand nearly 22 million barrels lower than a year ago at this time, the American Petroleum Institute said.
At the New York Merc, September crude oil futures leaped 57 cents to $17.50 a barrel.
