IBM, Du Pont lead 22.69-point fall


June 16, 1993|By Bloomberg Business News

NEW YORK -- Stocks closed mixed yesterday as slumps in International Business Machines and Du Pont reinforced pessimism about the outlook for corporate earnings.

The concern dented the initial optimism that greeted yesterday's consumer price report, traders said.

The Labor Department said consumer prices rose just 0.1 percent in May. The report, which followed Friday's news that producer prices were unchanged last month, eased concern that inflation might accelerate and might persuade the Federal Reserve Board to raise interest rates, said traders.

The Dow Jones industrial average tumbled 22.69 to close at a session low 3,492.00, led by IBM, Du Pont and Eastman Kodak Co. The average had risen 22.97 points in the two previous sessions.

Broader market measures ended mixed. Standard & Poor's 500 Index shed 1.45, to 446.26, while the Nasdaq Composite Index added 0.93, to 697.34.

"I would have thought that with the inflation numbers, there'd be more enthusiasm for the market," said Barry Berman, head trader at Robert W. Baird in Milwaukee.

Du Pont and IBM "definitely" hurt investor sentiment, said RichardMeyer, director of institutional trading at Ladenburg, Thalmann & Co.

Moreover, as far as investors were concerned, "the anticipation was over, and all the good news was out" with the CPI, said Richard Ciardullo, director of trading at Eagle Asset management.

Advancing common stocks baredly edged out decliners on the New York Stock Exchange. Trading was moderate, with about 226 million shares changing hands on the Big Board.

Du Pont plummeted $1.75, to $49.75, after an analyst at Goldman, Sachs & Co. removed his purchase recommendation on the stock and reduced his earnings estimates, citing the soft economy.

IBM tumbled $2, to $50, after a Salomon Brothers analyst said he expected the computer maker to announce as much as $5.4 billion in additional write-offs and possibly halve its already-reduced annual dividend of $2.16 a share on July 27, when the company reports second-quarter results.

The Du Pont and IBM news came in the wake of profit warnings last week from two other economic and market bellwethers, Minnesota Mining & Manufacturing and Apple Computer. Both warned that their profits wouldn't meet investor expectations.

The declines in Du Pont and IBM prompted investors to refocus on "weak economies around the world, especially in Europe," said John Blair, head trader at NatWest Securities.

"Triple-M has never fully recovered from that news," Ladenburg's Mr. Meyer said. 3M closed yesterday at $107.25, down $1.75. The stock was trading at $115.75 before last Thursday's profit warning.

Other stocks that fell on negative earnings announcements yesterday included Reebok International Inc., U.S. Homecare Corp., Solectron Corp., Reliance Electric Co., and Ametek Inc.

Weakness in Treasury bonds further constrained the stock market, traders said. "I think you're seeing pretty disappointing action in bonds, and I don't think that augurs well for stocks," said Mr. Blair.

Treasury bonds, which rose as much as 1/2 yesterday morning, slipped after Laura Tyson, chairman of the Council of Economic Advisers, was quoted by Dow Jones News Service as saying she doesn't think there is a political consensus to cut spending more than has been proposed.

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