Stocks continue fall on profits concern

March 02, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks dropped yesterday for the second day out of three amid concern that slower economic growth this year will translate into weaker corporate profits.

Declines in Chrysler Corp., Caterpillar Inc., International Paper Co., Aluminum Co. of America and other so-called cyclical companies whose performance is closely tied to swings in economic growth drove the market down, overshadowing a second day of gains in technology issues.

"The economy will be slowing, and it will have a [negative] implication on corporate earnings," said Joseph DeMarco, head of equity trading at HSBC Asset Management, a unit of Hongkong & Shanghai Bank. Automobile stocks "are getting crushed, and cyclicals are getting killed" compared with stable growth stocks such as Gillette Co. and Coca-Cola Co., Mr. DeMarco said.

The Dow industrials closed 16.25 points lower, at 3,994.80 after dropping as much as 25.94, paced by General Motors Corp. GM slid $2.125, to $40.50, on concern February sales slackened. Among other automakers, Chrysler Corp. dropped $2, to $41.375, and Ford Motor Co. eased 50 cents, to $25.625, amid reports Ford is offering Chrysler owners a $750 rebate on Ford's own minivans for two months in an attempt to boost its market share.

"It's late in the earnings cycle, and when earnings momentum peaks, you usually see that reflected in the stock market," said EdwardGoldfarb, head of portfolio strategy at Aeltus Investment Management in Hartford, Conn.

Mr. Goldfarb is pessimistic about stocks. Aeltus, which manages $22 billion in assets, has lowered the proportion of U.S. stocks in its portfolio to 35 percent in the past six months from 50 percent, largely because it expects that companies' earnings growth will slow down this year.

International Paper slumped $1.125, to $74.25. Paper stocks reacted to concern about weaker earnings at fellow paper maker Weyerhaeuser Co. and additional industry capacity at an Abitibi-Price Inc. plant in Thunder Bay, Canada. Weyerhaeuser fell $1.25, to $39.50.

Alcoa dropped $1, to $28. Goldman, Sachs & Co. downgraded investment ratings on six metal and mining stocks yesterday, among them Alcoa, Alumax Inc., Falconbridge Ltd., Inco Ltd., Magma Copper Co. and Phelps Dodge Corp.

Caterpillar Inc. dropped $1.375, to $50.25, after Smith Barney Inc. downgraded the maker of heavy construction equipment to "outperform" from "buy."

Maxus Energy Corp., the most active stock with almost 22 million shares changing hands, was unchanged, at $5.50, after jumping $1.75 late Tuesday in response to a $740 million takeover offer from Argentina's YPF SA. American depositary receipts of YPF, each representing one Class D share, slumped $1.625, to $17.375.

The Standard & Poor's 500-stock index weakened 1.74, to 485.65, hurt most by auto, electric utility, telephone, electrical equipment and household product stocks. The Nasdaq composite index dropped 1.86, to 791.87, as Intel Corp., Novell Inc., Telecommunications Inc. and Cisco Systems fell. The Russell 2000 index of small stocks fell 0.52, to 256.05. The Wilshire 5000 index dropped 14.61, to 4,789.3.

More than 13 stocks declined for every nine that rose on the New York Stock Exchange, where trading volume totaled 362.6 million shares, up from 247 million Tuesday and above this year's average of 329.7 million.

A host of technology stocks gained for a second day, fueled by Texas Instruments Inc., which climbed $2.25, to $81. The semiconductor maker predicted the worldwide market for computer chips will swell 21 percent to $124 billion in 1995.

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