Stocks in U.S. Fall for First Day in Six; Gold Shares
Are Biggest Losers
By Phil Serafino
U.S. Stocks Fall, Erasing Gains; Mining Shares Decline
New York, July 6 (Bloomberg) -- U.S. stocks fell for the
first day in six, erasing gains in a late-day slide. Mining
shares including Newmont Mining Corp. and Battle Mountain Gold
Co. were among the biggest losers as gold prices fell to a 20-
year low.
Bond yields climbed above 6 percent and hurt stocks, which
earlier rose to records on expectations for strong second-quarter
earnings reports.
''A good case can be made that bonds look cheap relative to
stocks here,'' said Timothy Ghriskey, a money manager for Dreyfus
Corp., which oversees $125 billion. ''On a short-term basis,
stocks might be slightly overvalued'' after last week posting the
biggest gains since October 1998.
The Dow Jones Industrial Average fell 4.12 to 11,135.12. The
Standard & Poor's 500 Index lost 3.10, or 0.2 percent, to
1388.12. The Nasdaq Composite Index dropped 4.24, or 0.2 percent,
to 2736.78. Sixteen stocks fell for every 15 that rose on the New
York Stock Exchange.
U.S. stocks last week set records after the Federal Reserve
raised interest rates for the first time since March 1997. The
S&P 500 and Nasdaq Composite ended last week with three straight
records. The Dow average set its first record Friday since May
13.
''We had a great run in the market last week,'' said James
Gribbell, a money manager with David L. Babson & Co. in
Cambridge, Massachusetts, which invests $22 billion. ''People
taking money from the market are waiting for that (earnings) news
to hit the tape.''
Investors ignored bullish comments from Donaldson, Lufkin &
Jenrette Securities Corp.'s chief investment officer, Thomas
Galvin, and Ralph Acampora, director of technical research at
Prudential Securities Inc. Both men boosted their year-end
forecasts for the Dow industrials, Galvin to 11,900 from 11,000
and Acampora to 13,000 from 11,500.
Gold
Newmont Mining fell 1 11/16 to 17 15/16, Battle Mountain
dropped 3/16 to 2 1/4 and Placer Dome Inc. lost 7/8 to 10 13/16.
Gold stocks were the biggest percentage losers in the S&P 500.
Gold prices plunged after the Bank of England sold 25 metric
tons at a below-market price in the first of several auctions
expected before next April. The U.K. government, which is
investing the proceeds in bonds, joined other gold-holders, such
as Australia, Belgium and Canada, that have shed the metal in
favor of assets with higher returns.
General Motors Corp. jumped 3 1/16 to 71 11/16. Barron's
reported that Sanford C. Bernstein & Co. analyst Gary Lapidus
forecast that the stock of the world's biggest automaker could
reach 185 by 2004. Lapidus said the stock could reach that level
if GM spun off its Hughes Electronics Corp. unit to help fund a
share buyback that would boost earnings per share.
Profit Reports
With the second quarter finished, companies are starting to
post earnings. Among the companies expected to report tomorrow
are Alcoa Inc. and Yahoo! Inc.
Analysts surveyed by First Call Corp. expect companies in
the S&P 500 to report operating profit growth of 11.4 percent in
the second quarter, which would be the best since the third
quarter of 1997. For the year, they expect 16.3 percent growth,
well above last year's 3.7 percent and the long-term average of 7
percent.
Oil stocks rose with the price of crude on signs the
Organization of Petroleum Exporting Countries will adhere to its
promised production cuts.
King Fahd of Saudi Arabia, the world's largest oil-producing
nation and OPEC's most influential member, said yesterday that
his country would stick with its output cuts. Kuwait and the
United Arab Emirates also said the output reductions should be
maintained.
''There really isn't much cheating going on,'' said James
Weiss, deputy chief investment officer for stocks at State Street
Research & Management, which oversees $55 billion. ''OPEC really
is doing a pretty good job of complying.''
Chevron Corp. gained 2 1/16 to 98 5/16, Texaco Inc. climbed
2 3/16 to 65 3/16 and Philips Petroleum Co. advanced 1 11/16 to
52.
Total, Elf
France's largest oil company, Total Fina SA, yesterday
offered as much as 47.5 billion euros ($48.6 billion) in stock
for Elf Aquitaine SA, a purchase that would almost double its oil
production. Elf rejected the approach.
Elf Aquitaine's American depositary receipts jumped 15 11/16
to 90, adding to last week's 5 percent rally. Total's ADRs jumped
1 3/4 to 67 1/2.
The American Stock Exchange Oil Index jumped 2.1 percent,
its biggest gain since May 26.
Internet
America Online Inc. gained 5 11/16 to 120 15/16. The No. 1
online service provider expects to reach $5 billion in sales this
year and plans to double its subscribers from the current 17
million in the next five years, the New York Times reported
Sunday. AOL plans to deliver services through TV sets and
cellular phones, the paper said.
Other Internet stocks also rose on anticipation that
industry leaders will report stronger-than-expected financial
results. Lycos Inc. gained 4 to 103 13/16 and Amazon.com Inc.
climbed 2 13/16 to 126 7/8.
Online shares slumped from mid-April through mid-June on
concern that interest rates were rising and that growth of
Internet businesses could be slowing.
''They got incredibly cheap,'' said Stephen Dalton, who
manages $1.5 billion for First Union Corp.'s First Capital Group.
Internet stocks ''are showing incredible growth in revenue and
now many of them are generating earnings.'' Dalton bought shares
of Yahoo in recent months as the stock fell, and also owns AOL,
DoubleClick Inc. and Inktomi Corp.
Drkoop.com Inc. soared 13 1/4 to 36 7/8. The Internet site
founded by former U.S. Surgeon General C. Everett Koop said it
will pay America Online $89 million over four years and give AOL
warrants to buy drkoop.com shares to become the largest health-
information provider for AOL's online service.
General Nutrition
General Nutrition Cos. gained 1 11/16 to 24 9/16 after the
No. 1 U.S. specialty-vitamin retailer agreed to sell itself to
Royal Numico NV of the Netherlands. Royal Numico will pay $25 a
share, or $2.5 billion in cash and debt. Almost 21 million shares
changed hands by 1:30 p.m. New York time, making it the most
active U.S. stock.
Books-A-Million Inc. rose 2 1/4 to 14 on speculation the No.
3 U.S. book retail chain may be bought by larger rival Borders
Group Inc., analysts said. Borders may offer to buy Books-A-
Million for $21 a share, according to a note on Jagnotes.com
Inc.'s Web site. That price would value the retailer's stock at
about $379.2 million. The companies couldn't be immediately
reached for comment.
Some 721 million shares traded on the NYSE, compared with
the three-month average of 782 million.
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