Budget woes help churn stock prices Investors fear slowing of earnings growth in software, manufacturing

January 06, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks were mixed yesterday as profit warnings from Adobe Systems Inc. and Duracell International Inc. combined with pessimism that the federal budget impasse will be resolved soon.

Investors spent most of the day concerned that White House and Congressional negotiators were unable to resolve the budget impasse, driving the Dow Jones industrial average down as much as 40.1 points.

Whipsawed by events in Washington, the average later rose 7.59 to 5,181.43 after the House of Representatives voted to recall furloughed federal workers and reopen government offices.

For the week, the 30-stock average rose 64.31 points.

The broader Standard & Poor's 500 index dropped 0.99 to 616.71 after being down as much as 5.68. The number of declining stocks on the New York Stock Exchange outpaced advancing issues by 1,157 to 1,183.

The Nasdaq composite index rose 3.65 to 1,033.47; the Wilshire 5,000 index fell 7.6 to 6,036.41 and the Russell 2,000 index of small-company shares gained 1.42 to 312.9.

Unexpectedly weak earnings from Adobe and Duracell sparked concern that earnings growth is slowing in the software industry and among a diversified group of manufacturers.

Adobe shares plunged $16.25 to $42.25, after falling as low as $36, as 21.9 million shares changed hands, making it the most active stock on U.S. exchanges.

Duracell fell $3.875 to $47.875 as sluggish holiday sales led the company to say earnings will fall short of expectations.

Adobe, a Mountain View, Calif.-based publisher of PageMaker software, said fourth-quarter profit from operations rose to 41 cents a share from 40 cents a year ago, far below analysts' estimate of 57 cents, because of costs associated with an acquisition.

Adobe exacerbated what already had been an ugly week for computer stocks, many of which were 1995's best-performing companies, traders said.

On Thursday, FTP Software Inc. collapsed $13.375, or 52 percent, to $11.875 after warning of weak earnings in the next few quarters.

Concern that the budget stalemate will send bond yields higher hurt bank and savings-and-loan stocks. And regional and money-center banks, whose profits typically fall when interest rates rise, posted the largest losses for a second day.

Oil stocks rallied as Texas crude oil climbed 35 cents to $20.26 a barrel, its highest since May.

Chevron Corp. rose 87.5 cents to $55.375; Exxon Corp. gained $2 to $83.375; and Texaco Inc. added $1.50 to reach $80.75 amid an improved outlook for 1996 earnings, traders said.

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