Stocks Tumble Despite Solid Profit Reports
Wall Street struggled through another blue Monday, as the stock market closed broadly lower amid rising bond yields.
The Dow Jones industrial average gave up 35.88 points to end at 5,390.94 after being down more than 50 points twice during the session.
Trading was moderate, but losers outnumbered winners by a substantial 1,770 to 649 on the New York Stock Exchange.
The Nasdaq market of mostly smaller stocks again suffered deeper losses than the Dow, as the composite index fell 16.29 points, or 1.5%, to 1,081.39.
The action suggested that investors remain anxious to take profits after last week’s market turmoil, which saw stocks plunge, then stabilize, in the busiest trading week ever.
Traders said stocks failed to respond Monday to some robust second-quarter earnings reports.
“The stock market is a forward-looking mechanism, so by the time you get to July, investors are looking out at 1997,” said Rao Chalasani, strategist at Everen Securities in Chicago. “Economic growth will be slower next year, so profit growth is going to further slow next year too.”
Notably, an impending earnings report from software giant Microsoft hung over the battered technology sector and the rest of the market Monday. After the close of trading, Microsoft said its earnings jumped 50% in the quarter just ended, slightly above expectations.
But the firm’s chief financial officer said he expects growth to slow over the next four quarters.
Microsoft fell 1 15/64 to 119 3/4 during regular trading, then slipped 1 more in after-hours trading.
Bonds were no help to stocks, as yields continued to inch up. The 30-year Treasury bond yield ended at 7.01%, up from 6.97% on Friday.
Bond traders said investors were nervous ahead of new testimony Federal Reserve Board Chairman Alan Greenspan will give before Congress today. When he spoke Thursday, Greenspan suggested that the Fed won’t necessarily raise interest rates soon but will act if inflation signals warrant.
Some investors were concerned that Greenspan may revise his testimony today to sound more “hawkish” about rates.
“I’m not expecting anything different. But now Wall Street anticipates the worst when it used to anticipate the best,” said Robert Stovall, president of Stovall/21st Advisors in New York.
Bonds ignored the bullish news of another sharp decline in key commodity prices, a potentially anti-inflationary signal. (Investor Spotlight, D10.)
On the negative side, the dollar sank again, falling to a seven-week low of 107.44 Japanese yen. That helped drag Tokyo stocks lower Monday, with the Nikkei-225 index sliding 2.2%. European stock markets were also slammed.
Meanwhile, the fearful U.S. stock market tone set by last week’s indications of rising mutual fund withdrawals also continued to dampen investor conviction.
“Everyone knew the money flows couldn’t be sustainable,” said John Cleland, chief investment strategist at Security Benefit Group in Topeka, Kan. “But the real test will be whether they’re going to be positive enough to provide some more fuel for stock prices, or if we’re going to go back to the days where everybody cuts and runs at the first sign of trouble.”
Among Monday’s highlights:
* Technology shares, which led last week’s market plunge, were mostly lower again. Computer networker Newbridge Networks dove 5 7/8 to 43 1/2 after a UBS Securities analyst downgraded the stock to “hold” from “buy,” citing in part worries about sales force turnover.
Other tech losers included Xylan, down 4 1/4 to 34 3/4; Sun Microsystems, down 2 3/8 to 52 5/8; Netscape Communications, down 6 1/2 to 46 1/2; IBM, down 1 1/4 to 92 1/2; and Ascend Communications, down 3 7/8 to 44 7/8.
* Airline stocks continued to weaken after last week’s TWA crash off Long Island, N.Y. TWA slipped 1/4 to 9 1/4; AMR, parent of American Airlines, lost 1 1/4 to 77 1/2; and Delta slid 2 1/2 to 70 1/4. The Dow transportation index sank 1.8%, leaving it barely above its Jan. 1 level.
Some investors fear lower traffic and higher security costs for the airlines in the wake of the crash.
Elsewhere, InVision, the maker of the only Federal Aviation Administration-certified bomb-detection device, jumped 3 to 21.
* Several big takeover announcements failed to incite much excitement in their respective industries. Electric utility Portland General shot up 6 3/4 to 34 7/8 after energy marketer Enron bid $2.1 billion for the firm, but the Dow utility index still slumped 0.9% to 209.61. Enron dropped 2 to 39 3/4.
Also, Atmos Energy slid 3 1/4 to 22 5/8 after bidding $339 million for United Cities Gas, which jumped 2 7/8 to 19 7/8.
* One bidder that got a much different reception was Washington Mutual, which surged 4 7/8 to 35 after it said it would buy the parent of American Savings Bank in Irvine. But most California S&L; stocks closed flat or little changed on the day, despite ongoing expectations of industry mergers.
* Stratosphere, owner of the Las Vegas casino and tower of the same name, slid 1 1/8 to 3 1/2 after reporting a quarterly loss of 19 cents a share and the resignation of its chairman, Bob Stupak.
* Among companies reporting earnings, Bristol Myers lost 1/8 to 87 7/8 and Atlantic Richfield eased 1/4 to 118 5/8, while AlliedSignal added 1/2 to 55 7/8 and Liz Claiborne gained 1 3/4 to 30 3/4.
Market Roundup, D8
