3M earnings news triggers 20-point slide by Dow MARKETS


June 11, 1993|By Bloomberg Business News

NEW YORK -- U.S. stocks closed lower yesterday after a hectic afternoon session that began when Minnesota Mining & Manufacturing became the latest big company to say earnings would fall below expectations.

The Dow Jones industrial average fell 20.21 points, to 3,491.72, with 3M accounting for almost all of the decline.

"That's what took the market down," said Dan Marciano, senior vice president in equity trading at Dillon, Read & Co. Aside from 3M, the market averages were little changed, traders said.

Stock prices didn't budge most of the morning, as investors waited for today's release of the producer price report for May to see where inflation is headed. Investors are concerned that an accelerating inflation rate might prompt the Federal Reserve to raise short-term interest rates.

3M shares plunged $9.75, to $106, on NYSE-composite trading of 2.29 million shares. The diversified manufacturer said second-quarter earnings would fall below investors' expectations because of the weak U.S. economy.

3M issued its profit warning about 11 a.m., causing trading in its stock to be halted for one hour. Trading resumed shortly after noon, immediately lopping 14 points off the Dow industrials.

The plunge in 3M also dragged down the broader Standard & Poor's 500-Stock Index, which lost 0.40, to 445.38. The Nasdaq Combined Composite Index fell 1.19, to 688.05, led by computer-industry shares.

"Big companies are starting to report earnings problems," Ronald Doran, director of institutional trading at C. L. King & Associates, said yesterday. "Today, it's 3M; yesterday, it was Apple Computer."

Erratic trading in transportation and oil stocks also affected the broader market. The Dow Jones transportation average closed down 20.17, at 1,526.60.

Concern about higher gasoline taxes sent airline and railroad stocks into a tailspin early in the session.

Transports fell after leading Senate Democrats tentatively agreed to boost the tax on gasoline and other transportation fuels about 9 cents a gallon to replace Mr. Clinton's broad-based energy tax. Although less onerous on business than Mr. Clinton's original levy, the move drew widespread opposition from the trucking and airline industries.

Transportation stocks recovered somewhat late in the day as crude oil futures plunged on Kuwait's rejection of an OPEC agreement to keep output unchanged. Traders said OPEC's failure to demonstrate it can keep production in check could push U.S. crude prices below $19 a barrel for the first time since January. Lower fuel prices would mean lower costs for transportation companies.

UAL Corp., parent of United Airlines, closed down $1.125, at $129.75.

The stock market was little changed in the first half of the session, as investors anticipated today's release of the producer price report, considered a barometer of inflation.

"Everybody is waiting for the PPI," said Mark Donahoe, managing director at Piper, Jaffray & Hopwood Inc. "My sense is the report will show that inflation is under control, and that's going to prompt a rally in the stock market."

After being unchanged most of the day, the benchmark 30-year bond edged up 1/8 , to yield 6.87 percent, down 1 basis point.

Declining common stocks led advancing issues by about 5-to-4 on the New York Stock Exchange. Trading was moderate, with about 233 million shares traded on the Big Board.

After 3M, international oil, computer systems, foods, and paper and forest products fell the most in the S&P 500.

Intel Corp. fell $1.25, to $54.625; Texas Instruments Inc. shed $1.50, to $66.25; and Advanced Micro Devices Inc. eased 75 cents, to $22.25.

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