Dow Off 36 as Earnings Jitters Grow
Blue-chip stocks skidded to their biggest loss in a month Wednesday as earnings jitters grew and traders used an unfounded rumor that Russian President Boris Yeltsin had died as an excuse to take profits.
The Dow Jones industrial average ended 36.15 points lower at 5,930.62, its largest decline since Sept. 5, when it dropped 49.94.
In the broader market, declining issues beat advancers 1,453 to 890 on active volume of 405 million shares on the New York Stock Exchange.
“The Yeltsin rumor was just one excuse,” said Peter Cardillo, director of research at Westfalia Investments. “The real essence of the decline was the fear of earnings and, from a technical standpoint, the market’s failure over the past two days to close above 6,000.”
After topping 6,000 for the first time in intra-day trading Monday and breaching the major milestone briefly Tuesday, the Dow did not even flirt with the level Wednesday.
The Yeltsin rumor hit financial markets in midmorning, sparking a sell-off of nearly 50 points in the Dow.
Russian authorities quickly denied the rumors, maintaining that Yeltsin was working from a sanatorium outside Moscow. The denial helped shave the market’s loss.
“People are leery here. We’re waiting to see the parade of earnings come out,” Cardillo said. “Are we waiting for a 10% correction? Now? Absolutely not.”
Analysts said the market was also bracing for data Friday on producer price and retail sale figures for September. Those reports are expected to shed more light on the direction of inflation and the economy.
Stocks won over yet another convert, with Morgan Stanley’s chief U.S. equity strategist, Byron Wien, changing his model U.S. equity portfolio, increasing the money allocated to stocks and decreasing cash, each by 5%.
Morgan Stanley said the move, which puts the portfolio at 85% stocks and 15% cash, reflects a change in Wien’s near-term view. Wien had been forecasting a 1,000-point fall in the Dow.
The technology-laden Nasdaq composite index ended only modestly lower, off 2.17 points at 1,237.98, as most chip stocks rose on a bullish September report on the book-to-bill ratio, which is a measure of the semiconductor industry’s activity.
Bond prices gave up early gains amid speculation that the government will report a jump in consumer prices next week, then sank even more after Federal Reserve Board Gov. Lawrence Lindsey hinted that the central bank might need to raise interest rates “at some point in the future” to combat inflation.
The yield on the benchmark 30-year Treasury bond rose to 6.83% from 6.80% on Tuesday.
Among Wednesday’s highlights:
* Chip-related stocks posting gains included Texas Instruments, up 2 to 57 1/8; Micron, up 7/8 to 32 3/8; Atmel, up 1 5/8 to 34 1/8; and Applied Materials, up 1 1/4 to 29 1/4.
* Tellabs, which makes and sells data transport and network access systems, soared 6 to 79 after posting strong third-quarter earnings.
* U.S. Surgical added 2 1/8 to 45 3/4 on news that it is introducing the first set of instruments for minimally invasive coronary bypass graft surgery and on the chairman’s forecast that 1997 sales will accelerate.
* Marvel Entertainment Group slid 2 3/8 to 5 5/8 after the company warned that it will report a loss for the third quarter.
* Lason Holdings, which offers office management outsourcing services, rose 2 3/4 to 19 3/4 in its Wall Street debut.
Heating oil prices fell sharply. A weekly report on inventories shows a large rise in available stocks, and that set off a round of selling by speculators who had bet that supplies would remain tight.
At the New York Mercantile Exchange, November heating oil fell 2.22 cents a gallon to close at 73.97 cents.
Heating oil stocks in the United States remain 17 million barrels below those of a year ago, a fact that has pushed heating oil futures to the highest levels since January 1991.
But in weekly statistics released late Tuesday, the American Petroleum Institute reported that distillate stocks, which include heating oil, grew by 1.3 million barrels. Traders had been expecting a much smaller buildup.
“The data may have given the feeling that we have turned the corner,” Refco Energy Group Vice President Victor Yu said.
“The dam finally broke. People decided to take profits while they can,” said Al Lindseth, a trader with GSC Energy.
Market Roundup, D5
