U.S. Stocks Fall, Led by Consumer Shares; Merck, Pfizer Drop
from Bloomberg
By Chelsea Emery
New York, Jan. 4 (Bloomberg) -- U.S. stocks fell as investors sold Merck & Co., Philip Morris Cos. and other consumer-related shares they had purchased in 2000 on concern the economy might slip into a recession.
Technology shares including Qualcomm Inc. and JDS Uniphase Corp. slipped as investors bet profit growth will continue to slow until the Federal Reserve's surprise interest-rate cut yesterday reinvigorates the economy.
``We're not going to see the results of the Fed easing until probably six months down the road,'' said Joseph DeMarco, head of trading for HSBC Asset Management Americas Inc. ``We all know there are problems for the next few quarters.''
The Nasdaq Composite Index lost 36.45, or 1.4 percent, to 2580.24, paring yesterday's record 14.2 percent surge. The Standard & Poor's 500 Index fell 13.02, or 1 percent, to 1334.54. The Dow Jones Industrial Average dropped 29.89, or 0.3 percent, to 10,915.86.
Ten stocks rose for every nine that fell on the New York Stock Exchange. More than 1.7 billion shares traded on Big Board, on track for its second-busiest day.
Fourth-quarter earnings for S&P 500 companies are expected to grow 4.3 percent from a year earlier, slowing from the third quarter's 18.4 percent gain, according to First Call/Thomson Financial, which tracks profit estimates.
Analysts expect earnings growth to climb to 5.4 percent in the first quarter of 2001.
The Morgan Stanley Consumer Products Index lost 2.8 percent as investors sold stocks whose earnings hold up well in a slowing economy. Philip Morris dropped $2.25 to $40, food distributor Sysco Corp. fell $3.94 to $23.56 and brewer Anheuser-Busch Cos. lost $3.38 to $35.88.
Drug Shares Fall
Pfizer led drug shares lower, falling $1.38 to $42.25 and Merck dropped $5.13 to $84. Abbott Laboratories fell $4.31, or 9.2 percent, to $42.75 and American Home Products Corp. fell $3.98, or 6.8 percent, to $54.97.
Biotechnology company Amgen Inc. lost $5.13 to $61.94 and Immunex Corp. lost $4.86 to $41.25.
The S&P Drugs Index rose 37 percent in 2000 as investors bet they would have the fastest profit growth in a slowing economy.
Consumer stocks ``do not benefit from a re-acceleration in the economy or lower rates,'' said Lynn Yturri, manager of the $740 million One Group Equity Income Fund. ``They were a major winning group'' during last year's market decline.
Among large technology companies, Qualcomm fell $5.25 to $78.81 after surging 19 percent yesterday, and JDS Uniphase declined $4.56 to $49.06 following a 37 percent advance.
Wal-Mart Stores Inc. fell 75 cents to $57.69. The largest retailer reported same-store sales that rose 0.3 percent in December, while analysts had estimated an increase of 1.5 percent to 2.5 percent.
Tiffany Plunge
Jewelry retailer Tiffany & Co. plunged $6.13 to $30.25 after saying sales were below expectations, citing ``weakened consumer confidence and unsettled financial markets.''
Limited Inc. fell 94 cents to $17. The clothing retailer said sales at stores open at least a year in the five weeks ended Dec. 30 were unchanged from a year ago. The company said it will cut expenses.
Intimate Brands Inc. lost 44 cents to $15.31 after the operator of Victoria's Secret lingerie stores said same-store sales fell 3 percent in December.
RadioShack Corp. bucked the trend, jumping $4.94 to $49.44, after the electronics retailer said same-store sales rose 8 percent in December from the same quarter a year ago.
Sears, Roebuck & Co. advanced 92 cents to $36.95. The department-store chain said it will close stores and cut employees after December same-store sales declined.
Profit Outlook
As many as 700 U.S. companies are expected to announce that fourth-quarter earnings will miss estimates. That would be the most for any period since at least 1995 and possibly the most ever, according First Call's research director, Chuck Hill.
So far, 517 companies including Microsoft and Intel have issued warnings, compared with 273 companies at the same time last year. More are expected next week as companies close their books on the quarter.
The Morgan Stanley Cyclical Index of stocks most directly tied to the economy surged 3.1 percent. Railroad operator CSX Corp. rose $2.25 to $29, and Ford Motor Co. gained $1.75 to $26.88 after analysts raised ratings on the companies, citing the rate cut.
Cisco Rises
Cisco Systems Inc. rose $1.19 to $42.23, extending yesterday's 24 percent gain, after Credit Suisse First Boston analyst Lissa Bogaty said the stock could rise to the low $50s in the near term.
The network-equipment maker is less sensitive than its peers to an economic slowdown, Bogaty said, and investors are growing more comfortable with its earnings forecast.
Microsoft Corp. gained $1 to $48.94, and International Business Machines Corp. climbed $1 to $95.63.
Financial stocks rose for a second day. Lower interest rates will spur trading and sales of bonds, boosting brokers' profits, said Merrill Lynch & Co. analyst Judah Kraushaar, who raised his near-term rating on Morgan Stanley Dean Witter & Co. to ``buy.'' Morgan Stanley climbed $4.56 to $88.25.
Lehman Brothers Holdings Inc. gained $2 to $78.13. The No. 3 U.S. securities firm said fourth-quarter profit rose to $1.46 a share, 16 percent more than analysts had forecast.
Bear Stearns Cos. climbed $3.38 to $57.25, even after the company said fiscal fourth-quarter profit slowed to $1.36 a share, 6 percent lower than the year-earlier period. Analysts had reduced their profit estimate to an average $1.11.
Auto-parts suppliers Delphi Automotive Systems Corp. and Lear Corp. gained with Ford after Credit Suisse First Boston analyst Wendy Needham raised the three companies to ``strong buy'' from ``buy.''
Delphi advanced 75 cents to $13.38 and Lear climbed $1.50 to $26. Needham said shares of all three companies should outperform the broader market after the rate cut, as automotive stocks did following similar cuts in 1987 and 1991.
BMC Gains
BMC Software Inc. rose $5.19 to $20.81 after it said fiscal third-quarter earnings will beat analysts' forecasts by as much as 38 percent.
Vitria Technology Inc. slid $3.50 to $4.50 after the electronic-commerce software company said it expects a fourth- quarter loss, excluding charges, of 1 cent to 3 cents a share. Analysts had expected Vitria to earn 1 cent.
Investors will watch tomorrow's report on December employment for signs the economy has slowed enough to prompt the Fed to cut rates further before its Jan. 31 meeting.
``This has the potential to be a vanguard report,'' said Charles Reinhard, equity strategist at Lehman Brothers. ``If the jobs report is weaker than anticipated, the market will start to think the Fed will be at our rescue sooner rather than later and do more, rather than less,'' which could boost stocks in the short term.
Best Regards, J.T. |
