Stocks fall, led by consumer-product firms Dow off 1.62

WALL STREET

April 07, 1993|By Bloomberg Business News

NEW YORK -- Stocks closed lower yesterday amid further declines in the shares of consumer-products companies, stemming from concern that price-conscious consumers might shun brand names.

"It's a natural reaction to the Philip Morris situation," said Eric T. Miller, chief investment officer at Donaldson Lufkin & Jenrette.

Consumer-products stocks began dropping Monday after concerns arose about the value of brand names, prompted by Philip Morris' plans to reduce the price of its Marlboro cigarettes through promotions and to boost advertising to try to retain market share.

The Dow Jones industrial average lost 1.62, to close at 3,377.57.

An erosion of personal income and low consumer confidence have generated "price-conscious" consumers, a change that translates into lower earnings for sellers of brand-name products, said Michael Metz, chief market strategist at Oppenheimer & Co.

"The strength of the consumer sector is really a function of consumer confidence," he said.

Procter & Gamble fell 62.5 cents, to $46.75; Colgate-Palmolive lost $2.125, to $60; Quaker Oats dropped $1.625, to $63.375; and PepsiCo closed off 50 cents, to $40.

Broader-market indexes closed lower. The Standard & Poor's 500 index fell 1.13, to 441.16, and the Nasdaq Composite index tumbled 6.57, to 664.14. The American Stock Exchange Market Value index dropped 0.13, to 417.71.

Disappointing earnings projections hurt shares of other companies, such as Policy Management Systems, which plunged $36.25, to $47.625. The supplier of software and data processing to the insurance industry expects its first-quarter earnings to be one-third below previous estimates of 70 cents a share as the result of delays in closing contracts, among other things.

Still, institutional and individual investors are shifting cash to stocks, said Jack Conlon, managing director at Rothschild Inc. "You still do have this very strong cash flow into the market," he said.

Trading on the New York Stock Exchange totaled 294 million shares, above a three-month daily average of 264 million shares. Declining stocks exceeded advancing issues by 9-to-7 on the NYSE and by 2-to-1 on the Nasdaq.

Concern about tomorrow's report on March producer prices and Friday's report on March consumer prices, coupled with Passover and Easter observances, could keep many investors out of the market this week.

Producer prices likely rose 0.3 percent in March, according to a survey of 15 economists. The "core" rate, which excludes volatile food and energy prices, is also expected to have risen 0.3 percent.

Retail stocks dropped after an industry survey indicated that sales declined 0.4 percent last month compared with February. Wal-Mart Stores fell $2, to $27.75, and Home Depot tumbled $3.375, to $55.875.

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