Stocks End Mostly Lower on Profit Fears
Stocks were broadly lower Wednesday for a third straight day, as profit taking continued amid concerns about future corporate earnings growth.
Meanwhile, in Europe, German central bank officials set a negative tone for markets there by suggesting that no more interest rate cuts will be forthcoming.
On Wall Street, the Dow Jones industrials ended down 25.34 points at 6,036.46, although they bounced back from a 60-point midday loss.
In the broad market, losers topped winners by 13 to 11 on the New York Stock Exchange and by 21 to 18 on Nasdaq.
However, the Nasdaq composite index rebounded somewhat from Tuesday’s sharp loss, gaining 7.88 points to 1,227.88 as some tech issues bounced back.
The tech sector had a relatively good day despite a plunge in shares of computer services firm Electronic Data Systems, which tumbled 11 1/8 to 48 3/8 after reporting that third-quarter earnings rose 8.4% but also warning that growth is likely to slow in the current quarter.
By separating from General Motors earlier this year, EDS was expected to be free to attract other major customers. But competition from Computer Sciences and other rivals caused EDS’ new business contracts to plunge 18% in the first nine months of 1996.
Still, EDS predicted healthy contract growth in 1997. The company’s chief financial officer said he was “puzzled” by the extent of the stock’s slide.
On balance, third-quarter corporate earnings reports have been fairly strong, but many investors are worried that fourth-quarter and 1997 growth will be slower if the U.S. economy continues to decelerate.
“Companies are having problems with their earnings momentum quarter by quarter,” said Brian Belski, managing director at Dain Bosworth Inc. in Minneapolis.
That is encouraging some investors to take profits in stocks after their sharp run-up of the last two months, analysts say.
In the bond market Wednesday, yields bounced around but ended mostly lower after investors showed decent demand for new five-year Treasury notes. The Treasury sold $12.5 billion of the notes at an average yield of 6.33%.
The bellwether 30-year Treasury bond yield slipped to 6.83% from 6.85% on Tuesday.
Bonds may have been helped by falling oil prices. Crude oil, gasoline and heating oil futures all slumped from their recent highs after the Energy Department and the American Petroleum Institute reported rising inventories of heating oil in the Northeast, easing supply worries caused by cold weather.
Refiners, apparently heeding government pressure, have begun shipping substantial new oil supplies to the Northeast from other regions of the country.
Meanwhile, in Europe financial markets were riled by comments from the German Bundesbank’s chief economist, Olmar Issing, who said he sees no reason to expect lower German interest rates. Bundesbank Vice President Johann Wilhelm Gaddum echoed that, saying German rates are at the right levels for the economy.
The Frankfurt DAX stock index fell 0.7% to 2,699.53 in regular trading and dropped further after-hours.
But in Japan, long-term bond yields ended near 10-month lows on expectations for continued weak economic growth. (Investor Spotlight, D8.)
Among Wednesday’s market highlights:
* Electronic Data Systems’ steep fall initially dragged down El Segundo-based rival Computer Sciences, which traded as low as 73 1/4. But Computer Sciences’ shares rebounded to close at 77 3/8, off 2 1/2.
* Other stocks falling on earnings reports included DuPont, down 2 3/4 to 94 1/2 even though it said quarterly earnings surged; Eastman Kodak, down 1 to 78; and AlliedSignal, off 5/8 to 64 1/8.
* Boston Beer’s shares took one of the day’s biggest earnings-related hits, tumbling 3 1/2 to 12 1/2 after the brewer of Samuel Adams ales warned of slowing orders for the fourth quarter.
* On the plus side, Anheuser-Busch added 3/4 to 39 1/8 on its earnings report and AirTouch Communications gained 1/4 to 25 3/4 on its report.
* AT&T; helped drag the Dow index lower, falling a sharp 1 7/8 to 37 7/8 as investors registered disappointment over the naming of John R. Walter, the chief executive of printer R.R. Donnelley & Sons, heir to the AT&T; chairmanship.
* IBM helped stabilize the Dow, rising 2 1/4 to 129 1/4 and leading a broad rebound in tech shares after their recent pounding. Other tech winners included Intel, up 3 7/8 to 109 3/8; Compaq, up 2 1/8 to 71 3/4; Microsoft, up 2 to 134 1/2; Cabletron Systems, up 2 1/8 to 63 5/8; and Netscape Communications, leaping 5 3/8 to 49 7/8 on news of slightly better quarterly earnings on quadrupled revenue.
* Conrail rocketed 10 7/8 to 95 5/8 after Norfolk Southern topped CSX’s recent bid for Conrail. Norfolk slipped 3/8 to 94 1/8 and CSX fell 3/4 to 45 1/2.
* Among new stock issues, CyberMedia had a stunning debut. (See story, D2.) But another issue that was expected to be hot--natural foods supermarket chain Wild Oats--wasn’t. Its shares, priced at 25 apiece in the offering Wednesday, closed at just 25 3/8.
One long-awaited offering is set to be priced today: Wired Ventures, publisher of Wired magazine, darling of the cyberspace set, is expected to offer 4.75 million shares for sale in a price range of 12 to 14 a share.
