Market Savvy : Stocks Decline on 3rd-Quarter Profit Warnings
U.S. stocks tumbled Monday as companies began warning of shortfalls in third-quarter earnings and the 30-year Treasury bond rose above 6% for the first time in eight days.
The Dow Jones industrial average fell 176.04 points to 10,914.13--the third straight session in which it has dropped more than 100 points.
Broader stock indicators also suffered steep declines as light trading volume exaggerated price moves. The Standard & Poor’s 500 fell 24.25 points to 1,324.02, and the technology-oriented Nasdaq composite index plummeted 46.21 points to 2,712.69.
More than five stocks fell for every two that rose on the New York Stock Exchange, the broadest decline since Aug. 10.
Government bonds suffered their biggest price declines in three weeks as evidence of strong U.S. growth raised concern that last week’s Federal Reserve interest-rate increase won’t be enough to curb inflation this year.
The benchmark 30-year Treasury yield zoomed to 6.06% from 5.97% the previous session.
Some investors worry that interest rates may head higher. The Federal Reserve raised rates twice this year, including a quarter-point increase last week. Its next Fed policy meeting is Oct. 5.
“The market is reconsidering it prior assumption that we’re out of the woods,” said Jay Mueller of Strong Capital Management in Wisconsin.
Meanwhile, Progressive led insurers’ shares lower after saying earnings will miss analysts’ forecasts. Republic Services plunged after disclosing that 1999 earnings will be less than analysts’ estimates because new acquisitions aren’t performing well.
Progressive fell $16.25 to $102.75 after the company said late Friday that earnings will probably fall short of the $1.46-a-share forecast by analysts because of higher-than-expected claims, recent price cuts and direct marketing costs.
Allstate dropped $1.81 to $33.69, Safeco slipped $1.56 to $34.63, and American International Group lost $4.25 to $92.75.
Republic Services dived $5.38 to $11.13 after the trash hauler issued its warning. Industry leader Waste Management, which issued its own warning two weeks ago, eased 88 cents Monday to $21.75.
Office Depot, which warned of lower-than-expected second-half earnings, fell $3.81 to $10.50.
Tech shares declined after AT&T; announced a discount long-distance rate, following similar moves by competitors.
As “Internet backbone” companies such as these lower their prices, corporate-network and consumer-access prices will decrease, said Paul Foster, a trader at 1010 Wall Street in Chicago.
AT&T; fell $1.50 to $46, MCI WorldCom lost $2.44 to $76.06, and Cisco Systems slumped $1.75 to $66.75.
Pure Internet stocks paced the Nasdaq composite’s slide. America Online fell $5.88 to $93.25, and Amazon.com dropped $9.25 to $119.25.
In currency trading, the dollar fell against the yen, nearing a seven-month low, on doubts that finance officials meeting in Berlin will move to weaken the Japanese currency. The dollar fetched 110.73 yen, down from 111.56 on Friday.
Among the other highlights:
* Coulter Pharmaceutical plunged $10.94 to $23.50 after the biotech company and SmithKline Beecham said the Food and Drug Administration rejected their application to sell the cancer drug Bexxar and asked the two companies for additional data.
* Financial firms slumped amid interest-rate jitters. Citigroup fell $2.25 to $44.75, and American Express skidded $4.94 to $139.69.
* Brokerages were the S&P; 500’s worst-performing industry group. Charles Schwab dropped $3 to $38.25 after its online trading system crashed for an hour. Merrill Lynch fell $4.75 to $74.88.
Overseas, Japan’s Nikkei stock average rose 1.8%, and European indexes were mixed.
Market Roundup, C14
