Dow Falls on Yeltsin Fears, Earnings Jitters
Profit taking clipped stocks Wednesday as some investors used unfounded rumors that Russian President Boris Yeltsin had died as an excuse to sell. Concerns about corporate earnings also weighed on the market.
The Dow Jones industrial average ended 36.15 points lower at 5,930.62, its biggest point decline in a month.
In the broad market, declining issues beat advancers by 15 to 9 on the New York Stock Exchange in active trading.
“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 it on Wednesday.
The Yeltsin rumor hit 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 [third-quarter] earnings come out,” Cardillo said.
Early corporate earnings reports haven’t excited investors, with many stocks declining on the news. Still, the bulk of the reports are due out in coming weeks, and investors’ expectations for year-over-year earnings growth isn’t high, analysts say.
That raises the possibility that more investors will be pleasantly surprised, some Wall Streeters say.
In the bond market, yields rose as some traders braced for data Friday on wholesale price inflation and retail sales for September. Those reports are expected to shed more light on the direction of inflation and the economy.
The yield on the benchmark 30-year Treasury bond rose to 6.83% from 6.80% on Tuesday.
Bonds also were rattled by comments from Federal Reserve Board Gov. Lawrence Lindsey, who hinted that the central bank might need to raise interest rates “at some point in the future” to keep inflation subdued.
On Wall Street, most key indexes closed modestly lower with the Dow.
The technology-laden Nasdaq composite index eased 2.17 points to 1,237.98.
Among Wednesday’s highlights:
* The Dow was dragged lower by profit taking in Exxon, down 1 3/8 to 86 1/8; IBM, off 2 1/8 to 126 1/4; and Sears, down 3/4 to 47 3/4.
* On the upside, many semiconductor-related stocks posted gains after an industry report Tuesday indicated healthier orders. Texas Instruments gained 2 1/8 to 57 1/4, Applied Materials jumped 1 1/4 to 29 1/4 and LSI Logic rose 1 3/4 to 25 7/8.
* U.S. Surgical gained 2 to 45 5/8 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.
* Tellabs, which makes and sells data transport and network access systems, soared 6 to 79 after posting strong third-quarter earnings. But PairGain Technologies, another tech firm, fell 6 1/2 to 74 1/4 despite its hefty earnings gain.
Other stocks falling on earnings reports or earnings forecasts included Marvel Entertainment Group, which slid 2 1/4 to 5 5/8 after the company warned that it will report a loss for the third quarter; Thomson PBE, down 1 7/8 to 7 1/2; and Dow Jones, down 1 to 34 3/4.
* Among new issues, Lason Holdings, which offers office management outsourcing services, rose 2 3/4 to 19 3/4 in its Wall Street debut.
In commodity trading, 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.
Market Roundup, D5
