Stocks Decline Again; Dow Below 6,000
Stocks stumbled for a fourth straight day Thursday, sending the Dow Jones industrial average below 6,000, on reports of disappointing corporate earnings and fresh worries about inflation.
The Dow industrials fell 43.98 points to 5,992.48, closing below 6,000 for the first time since Oct. 11.
The blue-chip index dropped more than 40 points early in the day, then rallied with bonds to almost wipe out its loss, but it retreated a second time with bonds in the afternoon.
Bonds fell as a drop in claims for jobless benefits revived concerns that increases in earning and spending may quicken inflation.
The benchmark 30-year Treasury bond yield rose to 6.88% from 6.85% on Wednesday. It was the highest yield since Oct. 16.
Alfred E. Goldman, a market analyst at A.G. Edwards in St. Louis, said the drop in bond prices merely provided an excuse for investors to take some profits in the stock market, which has been on a tear to new highs since mid-July.
“The stock market is in a correctional phase anyway, and why not? We’ve had a tremendous run since July 16 and since Labor Day,” Goldman said.
At its record high last Friday of 6,094.23, the Dow had rebounded more than 900 points, or nearly 18%, from its low of 5,182.31 during trading July 16. And it was up 9% since right before Labor Day.
Declining issues outnumbered advancers Thursday by about 12 to 11 on the New York Stock Exchange.
Broad indexes ended lower. The Nasdaq composite fell 0.88 point to 1,227.00, the NYSE composite index fell 2.13 points to 373.78, the Standard & Poor’s 500-stock index declined 4.98 points to 702.29, and the American Stock Exchange’s market value index eased 0.93 point to 569.80.
The catalyst for the drop in both bonds and stocks was a Labor Department report that the number of U.S. workers filing first-time claims for jobless benefits fell by a surprising 22,000 last week to the lowest level in nearly two months.
The report caused worries, said Ed Lavarnway, a stock trader at First Albany Corp., that data on durable goods, home sales and consumer sentiment due out today would show sufficient inflation to prompt the Federal Reserve Board to raise interest rates.
“It goes back to the basic concern about whether the economy is growing too quickly and whether there is a shortage of labor,” Lavarnway said.
Rising Treasury yields didn’t keep municipal bond issuers, led by Chicago’s O’Hare International Airport, from selling about $600 million of debt today. Banc One led companies selling about $900 million of debt.
Investors also dumped stocks in the face of mixed earnings reports.
Procter & Gamble shares led the Dow industrials lower, dropping 2 1/4 to 94, after the company reported first-quarter net earnings of $1.39 per share, up from $1.27 and higher than analysts’ projected $1.37 a share. But sales were lower in Asia and Latin America, largely because of currency fluctuations, P&G; said.
Shares of Boeing, another Dow component, fell 1 1/2 to 95 1/2, even after the aircraft maker reported a 13% jump in third-quarter profit to 74 cents per share from 66 cents a year ago. The earnings were in line with analysts’ expectations.
Overall, profits in the quarter ended Sept. 30 beat expectations. Of the 375 companies in the S&P; 500 to report so far, 52% beat expectations and 32% have missed them. The rest were in line with estimates.
Among broad U.S. stock indexes, the Russell 2,000 index of small-capitalization stocks rose 0.15 point to 343.08; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, slid 36.56 points to 6844.03.
Among Thursday’s highlights:
* There were some bright stories on the earnings front. United Technologies gained 4 1/8 to 127 5/8 after the company reported a 21% jump in profit Wednesday.
* Lucent Technologies, the communications company recently spun off from AT&T;, rose 2 to 50 3/8 after reporting fiscal fourth-quarter earnings of 40 cents a share, exceeding analysts’ expectations.
* Shares of St. Jude Medical surged 4 1/8 to 41 1/2 a day after it agreed to buy defibrillator maker Ventritex of Sunnyvale, Calif., in a stock swap valued at about $505 million.
* Republic Industries gained 1 5/8 to 30 5/8 on investor excitement over the opening of the company’s first used-car superstore in Florida, market sources said.
* Investors took profits in railroad stocks, betting that Norfolk Southern’s surprise bid for Conrail, which rivals a previous friendly offer from CSX, might forestall a Conrail merger with either company. Conrail’s shares declined 2 to 93 5/8, CSX’s shares dropped 1 1/2 to 44 and Norfolk Southern declined 1 5/8 to 92 1/2.
* Quaker Oats dropped 1 3/4 to 34 5/8. Investors cited continuing uncertainty regarding the company’s plans for its money-losing Snapple beverage unit.
* Shares of TSX dropped 2 3/8 to 9 1/2 after it was reported that Tele-Communications told it and other vendors that supply cable-transmission equipment to stop shipping orders already made. Shares of Oak Industries, one of the other vendors, fell 1/8 to 28.
