Tuesday, March 23, 1999
Stocks Fall Sharply
As Worries Persist
About Tech Profits
By AARON ELSTEIN
WSJ INTERACTIVE JOURNAL
Stocks fell sharply Tuesday as earnings disappointments and the prospect of higher energy prices weighed on the minds of investors. Treasury bonds edged higher and the dollar weakened.
The Dow Jones Industrial Average dropped 218.68, or 2.21%, to 9671.83, recovering from a loss of 257.80 at its session low. Nearly four times as many stocks on the New York Stock Exchange lost value as gained.
The blue-chip average sank more than 180 points at 1:01 p.m. EST, triggering the Big Board's so-called trading collar that limits large program trades. It was only the fourth time that the trading curbs have been put in place since the exchange increased the trigger to 180 points from 50 points on Feb. 16, and the only the collar was triggered due to a loss.
The Standard & Poor's 500-Index tumbled 34.74, or about 2.5%, to 1262.27 and the New York Stock Exchange Composite Index shed 15.04 to 595.45. Worries about earnings at technology companies pulled the Nasdaq Composite Index down 73.09, or about 3%, to 2322.85.
Shares of BellSouth fell 2 5/8 to 42 15/16 after the company told analysts that first and second quarter earnings would be lower than most analysts had anticipated, though the company said it still expects to reach earnings targets for the full year. A Goldman, Sachs & Co. analyst cut his first- quarter earnings estimates to 45 cents per share from 47 cents.
Other telecommunications also fell. Ameritech fell 2 7/16 to 61 11/16 and Bell Atlantic fell 1 3/16 to 51 13/16.
Analysts say they expect to more earnings warnings in the coming days as companies prepare to release their quarterly results. Investors are worried, they said, that such companies as Compaq Computer may announce similar shortfalls after market-research firm PC Data said February retail PC revenue fell 16%. Investors also are waiting to hear Tuesday from 3Com, due out after the close of trading.The company had earlier warned that earnings would disappoint.
Further adding to the discomfort was Merrill Lynch & Co.'s decision to pare its earnings estimates for Coca-Cola, one of the 30 Dow industrials. A Morgan Stanley Dean Witter analyst also made cautious remarks about the beverage giant, and its shares slipped 2 3/8 to 65 5/16.
"Coca-Cola's earnings haven't grown in three years, yet its stock is three times higher," said Richard Cripps, chief market strategist at Legg Mason Wood Walker. "That's the kind of thing the market has to deal with now."
Russ Crebs, director of research at SoundView Financial Group, said there are signs that March PC sales may be better than expected. He noted, however, that "until the market sees someone who confirms that, who offers some direction, no one's going to be willing to take a stand for these companies."
Internet stocks, a chief source of support for the market lately, posted steep losses. Ameritrade fell 33 5/16 to 53 5/16 and America Online dropped 6 7/8 to 123 1/8.
Financial stocks fell sharply, with the Keefe, Bruyette & Woods bank-stock index off 24.30 to 846.30. Citigroup shares fell 2 5/16 to 61 5/16 and American Express dropped 1 1/2 to 121 3/8. Shares of First American, a banking company based in Nashville, Tenn., slumped 4 1/8 to 36 15/16. The company warned after the market closed on Monday that first-quarter earnings would fall short of consensus estimates by as much as 17%.
Oil stocks failed to receive a boost from confirmation that the Organization of Petroleum Exporting Countries will cut production by over 1.7 million barrels per day. Three non-OPEC members also agreed to cut back production by about 400,000 barrels. Oil futures fell slightly.
Traders said they expect the market to languish over the next several days because there may be little to capture investors' attention aside from companies saying they expect to miss earnings estimates.
"After the market's gravity-defying rise, this drop-off isn't unexpected," said Bill Schneider, head of equity block trading at Warburg Dillon Read.
World-wide, stocks slumped in dollar terms. The Dow Jones World Stock Index was down 4.11 to 205.76 as of 4 p.m. EST.
In major market action:
Stocks tumbled. On the Big Board, where 808.6 million shares traded, 663 stocks rose and 2,330 fell.
Bonds rose. The bellwether 30-year Treasury bond rose more than 1/4, or $2.50 per $1,000 bond face value. Its yield stood at 5.54%.
The dollar weakened. The dollar traded at $1.0908 to the euro and 117.85 yen to the dollar, compared with $1.0896 and 118.03 yen late Monday in New York.
Tapewatch Update
Tough FCC conditions could significantly delay, or even scuttle, two planned Baby Bell mergers: SBC Communications' (SBC) $56 billion acquisition of Ameritech (AIT) and Bell Atlantic's (BEL) $52 billion merger with GTE (GTE).
SBC Communications shares slipped 1 1/4 to 49 3/16 in afternoon trading Tuesday; Ameritech slid 2 3/8 to 61 3/4; Bell Atlantic lost 2 to 51; and GTE fell 2 1/4 to 57 5/8.
|
