Stocks in U.S. Fall as Eli Lilly Leads Drugmakers Lower on Profit Concern
Wed, 17 Mar 1999, 2:01pm EST
U.S. Stocks Fall; Lilly Leads Drugmakers Down on Profit Concern
New York, March 17 (Bloomberg) -- U.S. stocks fell, a day
after the Dow Jones Industrial Average briefly topped 10,000 for
the first time. Eli Lilly & Co. led drug stocks lower after SG
Cowen & Co. said 1999 sales of the company's best-selling drug,
Prozac, will be lower than expected.
''Emotionally, people had targeted 10,000 as their goal for
the market, so they had selling planned when the market reached
that level,'' said Ned Riley, chief investment officer at
BankBoston Corp., which oversees $30 billion in Boston.
The Dow Jones Industrial Average dropped 46.07, or 0.5
percent, to 9884.40 in midday trading. The Standard & Poor's 500
Index fell 11.24, or 0.9 percent, to 1295.12. The Nasdaq
Composite Index fell 13.86, or 0.6 percent, to 2425.41. Eight
stocks fell for every five that rose on the New York Stock
Exchange.
Investors are wary of any bad news about earnings as the
quarter draws to a close. Cowen's comments on Lilly follow a
warning from Saks Inc., the owner of Saks Fifth Avenue stores,
late yesterday.
''On the whole, corporate America is having a tough time,''
said Marco van den Broek, who helps manage about $4 billion in
assets at F. Van Lanschot Bankiers in Hertogenbosch, Netherlands.
''Some earnings expectations could turn out to be too high.''
Lilly fell 5 1/16 to 89, shaving the most off the S&P 500.
Investment bank SG Cowen & Co. said in a report that this year's
sales of Prozac could be $2.93 billion in 1999, below the firm's
$3.05 billion forecast. SG Cowen also said its per-share earnings
estimate of $2.32 for Lilly may be ''a couple of pennies too
high.''
Other drugmakers fell. Merck & Co. dropped 3/4 to 85 1/16
and Pfizer Inc. declined 1 5/16 to 140 11/16. Baxter
International Inc., a maker of health-care products, fell 4 9/16
to 69 3/8 and was the biggest loser in the S&P 500.
''Considering these top-line stocks have been priced to
perfection, any kind of flaw or imperfection would undermine the
group in the short term,'' said Riley, who owns Lilly shares. He
said he plans to buy more of the stock, which trades at 39 times
estimated 1999 earnings.
Triple Witching
Trading is likely to be volatile before Friday's ''triple
witching,'' the simultaneous expiration of stock options, futures
and options on futures, as investors buy and sell stocks and
options to reverse earlier bets.
Triple witching ''has a tendency to keep a market in a
narrower range,'' said Peter Cardillo, research director at
Westfalia Investments in New York. ''It increases volatility as
traders square off their positions.'' Triple witching days occur
four times a year, on the third Friday in March, June, September
and December.
Saks fell 1 13/16 to 27 1/8. The owner of Saks Fifth Avenue
warned after the market closed yesterday that this year's profit
may be less than expected.
The Dow average could close above the 10,000 mark in as
little as one trading day -- or as many as 1,780 sessions, if
history is any guide.
Whither Dow?
The first time the Dow crossed 1000 during trading, in
January 1966, it took 1,780 trading days longer to close above
that point, according to statistics from LIMResearch.com in New
York. The close finally occurred in November 1972.
Excluding that aberration, the Dow took 25 days, on average,
to close above a thousand-point barrier after crossing the mark
during trading.
Gains usually continue after the average trades above a
significant milestone, according to LIMresearch.com. Including
the 100-point milestones starting with 500, which all came in the
1950s and 1960s, three months after passing each mark the Dow was
higher 71 percent of the time.
''People are so nervous with the 10,000 level that when
selling comes in, they stand back to see how low it's going to
go,'' said Jack Regan, chief derivatives strategist at Josephthal
& Co.
Movers
Some 96 stocks on U.S. exchanges rose to new 52-week highs,
while 143 fell to lows.
Charles Schwab Corp. fell 2 13/16 to 85 11/16 after
customers were unable to log on to the biggest online broker's
Web trading system for 15 minutes, beginning about 10 a.m.
Eastern time, the company said.
Frontier Corp. rose 6 13/16 to 51 7/16 after Bermuda's
Global Crossing Ltd. agreed to buy the U.S. local and long-
distance telephone company for $11.2 billion in stock.
Global Crossing, which sells capacity on its fiber-optic
phone network to other phone companies, said it will acquire
Frontier for $62 a share by the third quarter. The offer
represents a 40 percent premium over Frontier's closing price
yesterday. Global Crossing fell 4 5/16 to 47 3/16.
''There will be more mergers in the telecom sector,'' said
van den Broek. Global Crossing said March 11 it's building a
phone network to connect North and South America for about $1
billion, adding most of South America's major cities to its
worldwide system.
Oil stocks gained as crude oil rose as much as 2.8 percent,
close to a four-month high. A weekly report signaled a surge in
U.S. gasoline demand ahead of the spring driving season in the
world's top oil-consuming nation.
The American Petroleum Institute said gasoline inventories
dropped 3 percent last week, the biggest decline in five months
as gasoline demand jumped 17 percent from a week earlier. Mobil
Corp. rose 1 3/8 to 92 3/4, Chevron Corp. rose 13/16 to 86 3/16,
Texaco Inc. rose 2 1/16 to 55 15/16, Schlumberger Ltd. rose 1
7/16 to 57 5/16 and Halliburton Co. rose 1 1/8 to 36.
RealNetworks
RealNetworks Inc. jumped 11 15/16 to 126 7/8. Microsoft
Corp. is releasing a new version of its Web-browsing software
today, including a renewed collaboration with rival RealNetworks,
the Wall Street Journal Europe reported, citing Microsoft. The
agreement will let Internet Explorer users connect to
RealNetworks' newly enhanced directory of sites offering audio
and video clips, dubbed RealGuide.
Comverse Technology Inc. fell 2 9/16 to 80 5/8, although the
world's No. 1 provider of information and messaging systems to
telephone companies beat earnings forecasts by 3 cents a share
for the fourth quarter ended Jan. 31. The company also said it
will split its stock 3 for 2.
Novell Inc. gained 1 7/8 to 25 15/16 after analyst Joseph
Bellace at Merrill Lynch & Co. raised his rating to ''long-term
buy'' from ''long-term accumulate,'' Bellace expects Novell to
demonstrate new software which will provide companies the means
to use electronic commerce on their networks. He also expects the
No. 2 maker of networking software to announce an alliance with
Compaq Computer Corp. and another company at a conference next
week.
United Technologies Corp. rose 1 1/4 to 130 7/8 after Lear
Corp., the world's largest maker of car seats and interiors,
agreed to buy United Technologies' auto-parts unit for $2.3
billion, beating a rival bid from investment firm Blackstone
Group. Lear fell 13/16 to 35 9/16.
Coltec Industries Inc. rose 11/16 to 19 after B.F. Goodrich
Co., a tiremaker turned aerospace company, received approval
from the U.S. Defense Department for its proposed $1.88 billion
purchase of Coltec.
Nine West Group Inc. fell 5/16 to 23 5/16. The shoemaker
retailer will take a $11.2 million charge in the fourth quarter
to close its 63-store 9 & Co. retail chain.
Investors have been taking money out of Nine West stock over
the past two months, according to data from Bloomberg Analytics.
Peopl have been selling more shares as the stock price rose than
buying as the stock fell. |
