Stocks decline amid weak earnings Intel, Wal-Mart, 3M earn less than expected

budget impasse also hurts market

January 18, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks retreated yesterday as unexpectedly weak earnings from Intel Corp., Wal-Mart Stores Inc. and Minnesota Mining & Manufacturing Co. confirmed that profit growth is slowing.

The Dow Jones industrial average seesawed before a late-day slide to 5,066.90, down 21.32. The 30-stock average, hurt most by declines in 3M, Procter & Gamble Co. and Sears, Roebuck & Co., had been down 35.77. Investors' confidence was further jolted when budget talks between President Clinton and Republican lawmakers were canceled.

In the broad market, the Standard & Poor's 500 index dropped 2.06 to 606.38. About 1,230 stocks rose for every 1,117 that fell on the New York Stock Exchange, where volume grew to 459.4 million shares from 422.2 million Tuesday.

The Wilshire 5,000 index fell 3.97 to 5921.82; the Russell 2,000 index gained 0.87 to 302.62; and the AMEX market value index rose 1.30 to 533.21.

The Nasdaq composite index, composed of computer and high-tech stocks, rose 2.43 to 998.30, overcoming Intel's $5.625 slide to $50.125, as software stocks rallied.

To be sure, plenty of investors saw grounds for optimism in the performance of Sun Microsystems Inc., Linear Technology Corp. and Computer Associates International Inc., all of which rose.

Intel late yesterday said fourth-quarter net income rose to 98 cents a share from 43 cents a year ago, about 13 cents less than analysts had forecast. Earnings fell shy of forecasts because of slower demand from customers that make personal computers. Intel also said sales won't grow in the first quarter.

In reaction, Merrill Lynch, Salomon Brothers and SoundView Financial Group all slashed their estimates of this year's profit growth at the nation's biggest semiconductor maker.

Wal-Mart Stores said it expects earnings in the fiscal fourth quarter ending Jan. 31 to fall perhaps 11 percent beneath last year's profits, breaking a streak of 99 consecutive quarterly improvements. Shares in the nation's largest retailer sank $2.125, to $20.375, its lowest since May 1991.

3M tumbled $3.50, to $63.75, after it said fourth-quarter earnings will fall beneath the 79 cents it earned in 1994. Analysts previously forecast 3M would earn 86 cents in the quarter.

Improved profits at Sun Microsystems Inc., up $3, to $44.875, helped temper the market's decline. Sun, a computer and software maker, said fiscal second-quarter net income grew to 65 cents a share from 42 cents a year ago, beating forecasts of 57 cents a share.

Parametric Technology Corp., a software company, climbed $5.25, to $59.75, after it posted better-than-expected first-quarter earnings. Oracle Corp., another software maker, rose $1, to $42.75.

Project Software & Development Inc. leaped $6.375, to $30.875, after it posted better-than-expected earnings and Piper Jaffray Inc. raised its investment rating.

Companies that make computer networking equipment were especially strong after Ascend Communications Inc. said fourth-quarter net income climbed to 25 cents a share from 6 cents last year. Ascend jumped $3.25, to $39.50; Cabletron Systems Inc. surged $1.75, to $69.25; Stratacom Inc. gained $1.75, to $66.50; Crosscom Corp. added $1.50, to $10.75; and Cascade Communications Corp. rose $1.75, to $71.

Computer Associates International, yet another software maker, rallied $2.375, to $59, after recording fiscal third-quarter earnings of 90 cents a share, up from 69 cents last year and estimates of 84 cents.

Linear Technology Corp. vaulted $4.25, to $37.75.

McDonald's Corp., up $1.625, to $46.375, was the biggest gainer in the Dow industrials after the restaurant chain stepped up its expansion plans and said it will buy back as much as $2 billion worth of stock within three years.

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