FINANCIAL MARKETS : Blue Chips Recover After Early Rout; Yields Fall

From Times Staff and Wire Reports

The stock market closed mostly higher Tuesday despite a rout in some industrial issues, as an early selling wave quickly attracted buyers to a broad range of issues.

The Dow Jones industrial average, down nearly 50 points early in the day, closed off just 13.37 points at 4,767.04.

Winners held a slight edge over losers on the New York Stock Exchange, and most broad indexes closed with modest gains. Trading was active.


The Dow’s slump was led by Caterpillar, which tumbled 6 1/2 to 58 7/8 in heavy trading after the machinery giant said third-quarter earnings will be below last year’s results. The company blamed slowing demand for its products and said it will cut back production.

Caterpillar thus joined a growing list of companies warning that third-quarter earnings won’t meet expectations because of the economy’s continued sluggishness.

“Expectations are very high for the quarter,” said Melissa Brown, an earnings-tracker at Prudential Securities. “That means you’ve got estimates coming down or disappointments. You’re probably going to get both.”

Even as some investors dumped Caterpillar and other heavy-industry shares, however, buyers were pushing back into technology stocks, drug and food issues and other consumer companies whose earnings growth is expected to be more dependable in the near term.

The technology sector, which has recently had a number of its own earnings disappointments, was buoyed by some strong profit reports Tuesday.

Tech shares’ gains helped power the Nasdaq composite index up 10.14 points to 1,060.32.

Among Tuesday’s highlights:

* Industrial stocks losing ground with Caterpillar included Deere, down 1 1/2 to 85 1/4; Ingersoll-Rand, down 7/8 to 38 1/8; Nucor, off 1 1/4 to 44 3/4; Inland Steel, down 7/8 to 24 1/8; Alcoa, off 1 1/8 to 54, and Cincinnati Milacron, which lost 1 3/4 to 31 1/4.


* Other companies warning of weaker-than-expected earnings included packaging company Crown Cork & Seal, which slumped 5 3/8 to 38 3/4; Polaroid, which sank 2 1/4 to 41 1/8, and retailer Wal-Mart, which fell 5/8 to 25 1/8.

* On the plus side, technology stocks were bolstered by a healthy earnings report from computer networker Cabletron Systems, which soared 3 1/2 to a record 66 1/4, and by a bullish outlook issued by Applied Materials, which gained 2 1/2 to 103 1/2.

Other tech winners included Hewlett-Packard, up 2 3/8 to 83 3/4; Dell Computer, up 4 3/4 to 91; IBM, up 2 5/8 to 96 3/4; Wyle Electronics, up 2 1/8 to 44 3/8; Texas Instruments, up 4 1/2 to 82 1/4, and Cisco Systems, up 3 3/4 to 72 1/8.

Software firm Adobe Systems jumped 3 1/4 to 54 despite reporting earnings below expectations. The stock has tumbled from 66 1/2 recently on earnings concerns.

* Consumer stocks continuing to move up included Eli Lilly, up 2 1/2 to 87 7/8; Abbott Labs, up 7/8 to 42 1/4; Nike, up 4 3/8 to 104, and General Mills, up 1 3/8 to 54 3/8.

But drug firm Mylan Labs lost 3 to 20 5/8 after forecasting flat quarterly results.

In the bond market, the recent rally resumed on speculation that a new Japanese economic revival package will encourage purchases of U.S. Treasury securities.


The yield on the 30-year Treasury bond dropped to 6.48% from 6.53% on Monday.

In commodities trading, corn and soybean prices retreated as some weather forecasters softened Monday’s dire predictions of crop-damaging frost this week.

Overseas, Tokyo’s Nikkei-225 stock index added 155.22 points to 18,474.38. Mexico’s Bolsa index gained 19.16 points to 2,561.08.

Market Roundup, D6