Dow Ends Streak With 27-Point Loss
Blue-chip stocks closed sharply lower Tuesday, breaking what had been a three-day string of ever-higher Dow 30 readings.
“Investors didn’t get one of those big positive earnings surprises” today, said Dirk van Dijk, equity strategist at Dean Investment Associates, which manages $4 billion. “The market didn’t get its dose of lithium.”
The Dow Jones industrial average ended 27.09 points lower at 5,192.27, backtracking from Monday’s record high of 5,219.36. The Standard & Poor’s composite index of 500 stocks moved less dramatically, slipping just 0.61 point to 612.79.
The decline ended the biggest three-day rally in the Dow since February 1993. That advance was helped by dazzling earnings reports from International Business Machines, Chrysler and Caterpillar.
But those gains “are not representative of what is happening” through most of the market, said Raymond Diggle, head of research at First of Michigan Corp. On Tuesday, disappointingly weak earnings from Texas Instruments, Cummins and others took away some investors’ confidence that profits might expand beyond expectations.
Texas Instruments slid 2 1/8 to 46 1/2, and Cummins dropped 3/4 to 37 1/4.
Of the 188 companies in the Standard & Poor’s 500 Index that have reported quarterly earnings so far, 47.3% have been above projections and 36.2% lagged. At a comparable point in October, 55.2% of companies were ahead of expectations and 33.8% were behind.
Rising Treasury bond yields also hurt stocks. The yield on the Treasury’s benchmark 30-year bond jumped to 6.09% from 6.04% on Monday.
Investors were concerned that President Clinton might say something that would hurt the chances for a budget agreement in his State of the Union address Tuesday night. If so, that would send bond yields higher and raise corporate borrowing costs.
In the broader market, declining issues led advancers 1,172 to 1,109 on a volume of 412 million shares on the New York Stock Exchange.
Analysts said investors cashed in some profits from the recent rally but that they were also worrying that the prospect that U.S. government might default on its debts.
The government faces an unprecedented default if by March 1 Congress fails to raise the debt limit.
Treasury Secretary Robert Rubin has said that the country may not be able to meet a $5.8-billion interest payment due Feb. 29 and that it certainly will not be able to meet $30 billion of payments due March 1 for a variety of programs.
Wall Street also was weighing the chances that the Federal Reserve Board will lower interest rates at the Jan. 30 and 31 meeting of the central bank’s policy-setting Federal Open Market Committee.
Higher than expected personal-spending figures for November also put pressure on the bond market. U.S. personal spending in November rose 0.9%, its largest rise since February 1994. Economists had forecast an increase of 0.6%.
Among market highlights:
* Technology stocks were mixed. Read-Rite fell 4 1/2 to 20 1/2. The computer-component company posted better-than-expected results for the latest quarter but warned that its profit margin for the next quarter will be lower.
Digital Equipment rose 2 1/2 to 70 on strong earnings.
Apple Computer rose 1 1/8 to 31 5/8 and Sun Microsystems shed 4 7/16 to 44 1/8 on rumors about a merger possibility.
* Helene Curtis climbed 8 1/4 to 53 1/8 on renewed takeover talk.
* Premier Industrial surged 6 1/2 to 30 5/8 on news that it agreed to be acquired by British electronics distributor Farnell Electronics for $34 a share.
* In an initial public offering, computer software maker Red Brick Systems jumped 12 1/4 to 30 1/4.
Overseas, the Tokyo 225-share Nikkei stock average fell 0.6%, Frankfurt’s DAX index lost 0.3% and London’s FTSE-100 fell 0.5%.
