U.S. Stocks Fall on Concern That Asia's Slump Will Damage U.S. Profits
U.S. Stocks Fall on Concern Over Slowing Earnings Growth
New York, Aug. 3 (Bloomberg) -- U.S. stocks fell, led by oil shares, on
concern that Asia's economic woes will cut into U.S. corporate profit
growth. ''The market's overvalued,'' said Timothy Ghriskey, who manages
$4 billion for Dreyfus Corp. in New York. ''Asia's still a problem.
That's a major export economy for the U.S., and the demand in Asia
simply isn't there and won't come back right away.''
The Dow Jones Industrial Average fell 77.50, or 0.9 percent, to 8805.79
in late trading, led by Procter & Gamble Co. The Standard & Poor's 500
Index fell 7.52, or 0.7 percent, to 1113.15. The Nasdaq Composite Index
fell 19.32, or 1 percent, to 1853.07.
Statistical measures show the market is weaker than the major indexes
would indicate. More than two stocks fell for every one that rose on the
New York Stock Exchange, and 720 stocks reached 52-week lows on U.S.
exchanges, dwarfing the 67 issues at 52-week highs.
While Asia's impact on earnings preoccupied investors, some of the
biggest individual stock moves came as a result of merger news.
Procter & Gamble fell 3 7/16 to 75 15/16. The world's second- largest
consumer products company has declined for five straight sessions on
concern that further deterioration of sales in Asia could offset gains
in healthier regions.
Eastman Kodak Co. lost 2 1/2 to 81 3/8 after the company said it would
buy most of Imation Corp.'s medical imaging business for $520 million,
and the purchase won't help earnings for a year after the transaction
closes. Imation rose 1 9/16 to 17 3/8.
Two companies whose mergers were blocked on antitrust concerns plunged.
Bergen Brunswig Corp. dropped 8 1/2 to 44 1/2 and AmeriSource Health
Corp. tumbled 20 1/8 to 56 amid concern about their prospects for growth
after a judge blocked their acquisitions by two of the country's largest
drug wholesalers.
Cardinal Health Inc. planned to buy Bergen Brunswig and McKesson Corp.
had agreed to acquire AmeriSource. The government said the transactions
would probably reduce competition in the $94 billion-a-year U.S.
pharmaceutical distribution industry.
Cardinal Health dropped 15/16 to 95 1/8. McKesson rose 2 7/16 to 83
1/16.
Supermarket Merger
American Stores Co. rose 5 5/16 to 28 1/2, and was the biggest gainer in
the S&P 500, after Albertson's Inc. agreed to buy the company, the
third-largest supermarket in the U.S., for $11.7 billion in stock and
debt.
Albertson's will pay $30.24 a share for American in a purchase that will
create the largest U.S. chain of supermarkets and drugstores. American
operates Lucy, Jewel and Acme supermarkets. Albertson's rose 1/2 to 48
1/2.
Stratus Computer Inc. gained 5 1/16 to 33 15/16 after agreeing to be
acquired by Ascend Communications Inc. for $822 million in stock, or
$33.35 a share, a 15 percent premium to Friday's close. Ascend rose 2
7/32 to 46 11/16.
Stratus rose 28 percent last week on speculation it was a takeover
target. Ascend sells computer switches used by phone companies to
combine voice and data communications. Stratus makes computers that run
nonstop for banks and phone companies.
Asia's Slump
Stocks in Asia slumped as the yen's slide against the dollar heightened
concern that Japan's economic ills are spreading. In Europe,
weaker-than-expected earnings from HSBC Holdings Plc, the largest U.K.
bank by assets, showed that Asia's woes are hurting corporate profits.
Japan's Nikkei 225 Index dropped 1.3 percent, while Hong Kong's Hang
Seng Index sank 4.8 percent.
Many investors say U.S. stocks are too expensive, given that Asia's
problems are a drag on the U.S. economy and corporate profit growth.
''Earnings are slowing down,'' and Japan's economy isn't improving, said
Kenneth Ducey, chief trader at BT Brokerage, a unit of Bankers Trust
Corp. Those are bad signs for shares near record highs.
Exxon Corp. dropped 1 1/2 to 68 3/4 and Chevron Corp. lost 1 3/4 to 80
7/8 as oil shares led the S&P lower, moving in tandem with the price of
crude oil. Crude fell more than 3 percent amid skepticism that output
cuts by members of the Organization of Petroleum Exporting Countries
will reduce a worldwide oversupply.
The Internet is one industry where investors still expect strong profit
growth, as evidenced by the gain in an Internet- related company that
reports earnings tomorrow. Cisco Systems Inc., the No. 1 maker of
equipment that links computers, gained 1 3/4 to 97 1/2.
Movers
General Motors Corp. fell 1 1/16 to 71 1/4 after saying it will turn its
Delphi Automotive Systems unit, the world's largest auto-parts maker,
into an independent company through a stock sale and distribution to
shareholders worth as much as $13 billion.
The world's biggest automaker said it will sell a 15 percent to 20
percent stake in Delphi with an initial public offering of stock in the
first quarter. The stock rose almost 5 percent last Monday and Tuesday
in anticipation of the announcement.
CellStar Corp. fell 2 to 12 after the seller of wireless communications
products said the Securities and Exchange Commission is investigating it
for previously disclosed events that occurred in 1995 and 1996. The
stock dropped as low as 9 3/8.
In earlier filings with the SEC, the company disclosed the filing of
class-action lawsuits alleging that CellStar shares were artificially
inflated when the company misrepresented or failed to disclose
information to investors.
Nielsen Media Research Inc. plunged 1/2, or 12 percent, to 3 5/8. The
four largest broadcast networks and many large advertising agencies are
backing a new television-ratings service to rival Nielsen. The networks
say viewership isn't being assessed accurately, the Wall Street Journal
reported.
SFS Bancorp Inc. rose 7 to 27 after Cohoes Savings Bank said it will
acquire the company, the parent of Schenectady Federal Savings Bank. The
purchase price per share will be determined by the initial public
offering price of new Cohoes holding company common stock.
For the third time today, the NYSE imposed its ''uptick'' rule at 3:28
p.m. Eastern time when the Dow fell 50 points. The rule is lifted when
the Dow pares its loss to less than 25 points. |
