Stocks slip as Procter & Gamble falters


August 11, 1993|By Bloomberg Business News

U.S. stocks closed lower for the first time in three sessions yesterday following consumer-products giant Procter & Gamble Co.'s release of lower-than-expected earnings.

The decline in stocks was limited somewhat by continued optimism about the slide in long-term interest rates.

"The Procter & Gamble results definitely spooked the market," said Richard Ciardullo, head trader at Eagle Asset Management Inc., which oversees about $6 billion.

The Dow Jones Industrial Average fell 3.35 points to 3,573.73, closing above the session low of 3,564.62. A decline in Procter & Gamble shares led the average lower. Procter & Gamble said fourth-quarter earnings climbed 1 percent to $341 million, or 47 cents a share, before a restructuring charge. The report caused the stock to fall $1.12 to $46.25.

Meanwhile, investors are concerned that interest rates may rise as the Treasury adds $38.5 billion in new debt to the government bond market. The Treasury kicked off its quarterly auction with the sale of $16.5 billion in three-year notes.

The concern is that investors' demand will be weaker than anticipated because Treasury bond prices stand at historic highs, Mr. Ciardullo said. If demand is weak, yields will rise, taking some of the luster out of the stock market, he said.

The stock market has been buoyed this year by prospects that interest rates will stay low, prompting investors to seek higher returns in shares instead of cash holdings, Mr. Ciardullo said. "This outlook will change quickly if rates suddenly turn higher," he said.

The yield on the benchmark 30-year bond closed at 6.45 percent, down from yesterday but above the record 6.43 percent reached overnight.

Stocks rose Monday as the Dow industrials and the Nasdaq Combined Composite Index hit records after the Senate approved President Clinton's deficit-reduction program. Mr. Clinton's plan is expected to keep a lid on interest rates as higher taxes included in the plan are seen restraining economic growth.

"Today, people are a little less certain that rates will stay low as they wait for the Treasury to complete the bond auction," Mr. Ciardullo said.

The Nasdaq composite fell yesterday for the first time in four sessions, closing 1.41 points lower at 717.08, led by a slump in Microsoft Corp. Microsoft declined $2 to $71 amid continued concern about slowing earnings growth at the world's largest independent software company.

The Standard & Poor's 500 Index declined 1.28 points to 449.46, while the American Stock Exchange Market Value Index rose 0.39 point to 439.19. Declining common stock led advancing issues by a narrow margin on the New York Stock Exchange.

Trading was active as more than 255.5 million shares changed hands on the New York Stock Exchange.

Kodak rose for a seventh straight day. Much of the gain is tied to the company's dismissal of Kay Whitmore as chairman and chief executive. The stock gained 75 cents to $60.625 today.

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