Dow Loses 92 on Earnings Worries
U.S. stocks fell for the first time this week after a batch of companies, including Eastman Kodak and Data General, warned investors of lower profits in the months ahead.
The Dow Jones industrial average fell 92.92 points, or 1.2%, to 7691.77, while the Standard & Poor’s 500 index dropped 7.21 points, or 0.8%, to 950.73. The Nasdaq composite index fell 1.70 points, or 0.1%, to 1,547.06.
Markets in Indonesia, Hong Kong and Malaysia declined on doubts that Indonesian President Suharto will carry through on a pledge to institute the economic changes sought by international lenders. Hong Kong’s Hang Seng index fell 7%; Indonesia’s Jakarta Stock Exchange composite index slid 4.14%.
Mexico City’s leading IPC index ended down 1.31% amid concern about U.S. corporate earnings, Asian instability and a possible slowing of domestic economic growth after $1.8 billion in budget cuts.
Kodak’s forecast came on the back of a disappointing fourth-quarter earnings report. A strong dollar has made the products of Kodak and other U.S. exporters more expensive overseas. Kodak, the Dow’s worst performer last year with a 25% loss, fell $1 to $58.50.
So far this quarter, 66 companies in the S&P; 500 have reported earnings for the quarter ended Dec. 31. Of them, 58% topped expectations, 17% fell short of estimates and the rest were in line. At this point last quarter, about 55% of the companies had exceeded forecasts and 25% were below.
Still, investors are concerned that the positive picture won’t last.
“You’re going to have a difficult earnings environment in 1998,” said Edward Von der Linde, manager of the $330-million Lord Abbett Mid-Cap Value Fund. “The certainty that the market has had previously is undermined by the Asian crisis.”
Among Thursday’s highlights:
* ADC Telecommunications was the most active stock in the U.S., tumbling $5.56 to $30.44 as more than 20 million shares changed hands. Investors are concerned that Baby Bell phone companies recently cut purchases of telecommunications equipment, a move that could result in weak profits for ADC in the quarter ending Jan. 31.
ADC’s competitors also fell. Teltrend fell $1.50 to $15, Tellabs dropped $1.81 to $49.44, Lucent Technologies dropped $3.44 to $75.06 and Northern Telecom fell $1.94 to $42.56.
* Data General slumped $2.81 to $14.06 after the computer company said it expects per-share earnings for the first quarter ended Dec. 27 to be “below the low end” of analyst estimates. The company warned in October that sales would be slow in the quarter as it brought out a new technology that would take time for resellers to put in computers.
But Digital Equipment rose $1.88 to $39.38 after the computer and networking products company’s earnings met expectations even though Asian sales declined “in the double digits” after years of double-digit growth. The company said it doesn’t expect the decline to be as steep in coming months.
* Cognizant rose $1.13 to $46 after the U.S. market research provider said it will break itself into two separately traded public companies, IMS Health and Nielsen Media Research, to enable each unit to grow faster.
Bond yields ended barely changed for a second straight session as investors grappled with a flood of corporate debt and continued to cast a wary eye on developments in Asia. The yield of the benchmark 30-year U.S. Treasury bond rose to 5.74% from Wednesday’s 5.73%.
The dollar ended lower against the Japanese yen amid fresh signals that Japan has already seen the worst of the ongoing Asian economic crisis.
Market Roundup, D6
