Stocks fall amid unsure earnings prospects Procter & Gamble, American Express, IBM lead market's decline

February 20, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell in a late-day slide amid concern that share prices may have overshot earnings prospects. Procter & Gamble Co., American Express Co. and International Business Machines Corp. led the decline.

The Dow Jones industrial average fell 47.33 to 7,020.13, after rising 9.6 percent for the year through yesterday. A series of computer guided "sell" orders helped spark the late-day sell-off.

"You're looking at a 10 percent return for the S&P in a six-week period," said Philip J. Schettewi, who helps oversee $3.8 billion at Loomis, Sayles & Co. "It's not possible we're going to annualize that."

The Standard & Poor's 500 index fell 3.80 to 812.49, led by oil, telephone and regional bank shares. Both the Dow and S&P 500 set records Tuesday.

About 519 million shares changed hands yesterday, with decliners outnumbering advancers 1,304 to 1,261.

Earlier, computer stocks rallied on unexpectedly strong earnings from Hewlett-Packard Co., offsetting a disappointing profit report from Fluor Corp.

The Nasdaq Composite Index, dominated by computer-related issues, fell 0.21 to 1,365.58, losing all of a 4.64-point gain.

On the broader market, the Russell 2,000 index of small capitalization stocks rose 0.12 to 370.17; the Wilshire 5,000 index, consisting of stocks on the New York, American and Nasdaq exchanges, fell 19.47 to 7,773.11; the American Stock Exchange composite index climbed 1.05 to 599.15; and the S&P midcap index inched up .13 to 269.04.

The Standard & Poor's 500 Index is trading at about 19 times 1997 earnings, based on a Zacks Investment Research survey, 25 percent higher than its average 15.2 price-to-earnings ratio since 1980.

"There are an increasing number of people who think this market is overvalued," said David Diamond, a money manager at Boston Company Asset Management with $17 billion in assets. "I think these late-day moves are coming from program traders."

The yield on the benchmark 30-year Treasury bond rose 3 basis points to 6.57 percent.

Shares of engineering firm Fluor tumbled $13 to $62 after the company reported fiscal first-quarter profit that missed analysts' expectations and said it expects increased costs from two power projects. On Tuesday, Fluor touched a 52-week high of $75.875 and Goldman, Sachs & Co. named it one of its 30 top global stock picks.

The construction and engineering company said net income for the quarter ended Jan. 31 was 73 cents a share. Wall Street expected 77 cents.

Foster Wheeler Corp., another engineering company, fell $1 to $40.75.

Hewlett-Packard, the world's No. 3 computer maker, rose $2.1875 to $54.375 after reporting fiscal first-quarter net income of 87 cents a share, beating the 76 cents forecast by analysts. Earlier, the stock climbed to $57.50.

The unexpectedly strong earnings from Hewlett-Packard buoyed other computer shares. Seagate Technology Inc. gained $1.625 to $54.25; Compaq Computer Corp. climbed $1.875 to $85.375; and Sun Microsystems Inc. rose 93.75 cents to $34.6875.

Digital Equipment Corp. rose $1.125 to $34.625 after the company said it will spin off its TracePoint Technology Group into an independent unit that will create programs that make it easier for others to write software.

WMX Technologies Inc. fell 62.5 cents to $34 after the company said ServiceMaster LP will buy back from WMX its entire ownership interest in ServiceMaster for $626 million in cash.

Ford Motor Co. shares fell 50 cents to $32.75 after the automaker said it agreed to sell its heavy-duty truck business to Daimler-Benz AG's Freightliner subsidiary. That will let Ford focus on cars and smaller trucks, and expand Freightliner's leading share of the North American heavy-truck market. Investors were unfazed by the death yesterday of Chinese leader Deng Xiaoping.

Pub Date: 2/20/97

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