Stocks fall on concern over earnings Dow off 27

WALL STREET

November 17, 1992|By Bloomberg Business News

NEW YORK -- U.S. stocks fell yesterday on concerns that fourth-quarter earnings in the airline and electrical equipment industries will be below expectations.

"The airline stocks were extremely weak," said Dale Tills, manager of institutional equities trading at Charles Schwab in San Francisco. "The group had a big influence on the overall market."

The Dow Jones industrial average tumbled 27.29, to 3205.74, with Minnesota Mining & Manufacturing Co. and United Technologies Inc. accounting for much of the slide. Computer-driven sell orders shaved about 13 points off the index, according to Birinyi Associates, a firm that tracks computer-driven trading.

"Futures-related trading whacked the market," said Richard Ciardullo, director of trading at Eagle Asset Management.

Standard & Poor's 500 index declined 1.75, to 420.68. Declining common stocks outnumbered advancing issues by about 3-to-2 on the New York Stock Exchange. About 175 million shares changed hands on the Big Board.

The NASDAQ Combined Composite index fell for the second time in past nine sessions. The NASDAQ declined 3.14, to 634.02. The Dow Jones transportation average fell 27.80, to 1350.90, with UAL Corp., Delta Air Lines and AMR Corp. accounting for most of the drop.

The slide in airline stocks was touched off by First Boston Corp. analyst Paul Karos, who reduced his revenue expectations for the industry. Mr. Karos lowered his expectations because of concerns about the economy and on doubts that TWA Inc. or America West Airlines Inc. will in fact shut down operations in the next 12 months.

UAL fell $5.125, to $118.75; Delta declined $3.75, to $53.25; and AMR dropped $2, to $63.25.

Shares of electrical equipment companies were hurt by AMP Inc.'s announcement that slower sales in Europe and Japan will push fourth-quarter earnings "several cents below" third-quarter results. AMP plunged $7.875, to $57.

AMP's announcement prompted concerns about the earnings of other electrical connector firms, including Methode Electronics, Thomas & Betts, Raychem Corp. and Augat Inc. Merrill Lynch's Jerry Labowitz lowered his rating of the group because of AMP's announcement.

Beside concerns about the airline and electrical equipment industries, doubts are increasing about whether the German central bank will lower interest rates. A group of economists said real economic growth for the former West Germany will be flat in 1993. Despite this forecast, a leading German economist said it's unlikely the Bundesbank will ease credit because of lingering inflation concerns.

"The Bundesbank still hasn't lowered interest rates, and people are starting to wonder whether it ever will," said Robal Johnson, senior vice president in equity trading at Kidder, Peabody & Co. Lower interest rates in Germany are important for U.S. stocks because they would make U.S. securities more attractive relative to German securities.

L.A. Entertainment Inc., Oracle Systems Corp., General Motors Corp., AMP Inc. and American Telephone & Telegraph Co. were the five most actively traded issues on the U.S. Composite.

L.A. Entertainment Inc., a venture capital company whose stock trades below $1, continues to attract investors' interest. L.A. Entertainment acquired a majority stake earlier this month in American Blood Institute for $1.1 million. American Blood, a company that provides blood products and services to hospitals and clinics in southern California, is the fourth company in which L.A. Entertainment acquired a controlling stake over the past year.

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