Stocks tumble on concern for profits Asian currencies' fall might hurt earnings

Dow loses 132 points

September 11, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday on concern that plunging Southeast Asian currencies will hurt profits at Procter & Gamble Co., International Business Machines Corp. and others that depend on business outside the United States.

"People are worried that Asia is going into the tank, and that will cause a lot of companies to slow down," said Rex Wardlaw, a money manager with Wells Capital Management, which oversees $38 billion.

P&G, down $4.375 to $129.4375, led the Dow industrial average to its biggest decline in almost four weeks. The Dow fell 132.63, or 1.7 percent, to 7,719.28.

IBM sank $3 to $97 after Goldman, Sachs & Co. cut its earnings estimate for the third quarter by 10 cents, to $1.25, as it forecast that sales paid in Thai baht and Malaysian ringgit will look less impressive in dollar terms.

Shares of smaller companies, which are least exposed to developing regions, held up best. The Russell 2000 index of companies with less than about $3 billion in market capitalization fell 0.85, or 0.2 percent, to 436.90. The index had set nine %J straight records.

Yesterday's decline dragged the Dow's year-to-date performance below that of the Russell. As of yesterday, the Dow has risen 19.7 percent, the Russell, 20.5 percent.

IBM and P&G were hit hardest because investors had bid up their prices in recent years, seeing them as havens at a time when earnings disappointments can crush shares.

Some investors said that concern about currency translations is overblown, considering that the dollar has been rising consistently for more than two years without much damping of profits.

"What most people miss is that companies are much better at managing currency risk," said Tom Laming, who runs the Buffalo USA Global Fund, which focuses on companies with large overseas sales and has risen 23 percent this year. "They do a pretty good job," Laming said, "of hedging their exposure."

The Standard & Poor's 500 index fell 14.59, or 1.6 percent, to 919.03, dragged lower by shares of networking equipment companies, which reeled after Cisco Systems Inc. said it plans to cut prices on access controllers.

Nasdaq streak ends

The Nasdaq composite index, also heavily exposed to networking companies, fell 16.97, or 1.0 percent, to 1,639.25, breaking a three-day streak of records.

Cisco dropped $3.50 to $72.50. The company's rivals also fell: Ascend Communications Inc. lost $2.5625 to $40 and 3Com Corp. declined $1.75 to $49.75.

Among other broad market indexes, the Wilshire 5,000 index of stocks on the New York, American and Nasdaq stock exchanges dropped 105.07 to 8,891.01; the American Stock Exchange composite index slid 1.16 to 670.27; and the S&P 400 midcap index lost 1.91 to 322.75.

Apac Teleservices Inc., a telephone marketing firm, fell 50 cents to $12.50 after disclosing that earnings will fall short this year because of lower revenue and higher costs. And Sheldahl Inc., a maker of printed circuits for automotive electronics, forecast a wider loss than analysts expected and fell 62.5 cents to $20.875.

On the flip side, Anchor Gaming jumped $4.75 to $84.125 after it said analyst estimates for the fiscal first quarter "may be conservative."

New S&P 500 component

KLA-Tencor Corp. rose $2.8125 to $72.6875 after Standard & Poor's selected the computer chip equipment maker to replace Amdahl Corp. in the S&P 500 index, meaning that fund managers who track the index will have to buy the shares. Amdahl was unchanged at $12.375.

Bank stocks fell. NatWest Securities analyst Thomas McCandless said that yesterday was the first time in 40 years that the yield on the NatWest bank index was less than that of the 10-year government bond.

NationsBank Corp. dropped 81.25 cents to $58.1875 and Citicorp declined $3.0625 to $129.

Sterling Commerce Inc. shares rose $3 to $35 after Goldman, Sachs & Co. added the software publisher to its "Recommend List."

Pub Date: 9/11/97

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