Darkening earnings outlook fells market Dow closes below 8,000 for first time this month

Sears, Merck lead fall

Wall Street

October 17, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks took their worst tumble in more than a month after Merck & Co. reported disappointing earnings and Sears, Roebuck & Co. issued a gloomy profit forecast yesterday.

The Dow Jones industrial average suffered its worst decline since Sept. 10, falling 119.10, or 1.5 percent, to 7,938.88. It was the first time this month that the 30-stock average closed below 8,000. Merck and Sears accounted for one-third of the drop.

The Standard & Poor's 500 index fell 10.47, or 1.1 percent, to 955.25, and the Nasdaq composite index fell 23.71, or 1.4 percent, to 1,699.66. Each set an all-time high last week.

On the broad market, the Russell 2,000 index of small capitalization stocks lost 5.58 to 457.16; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 87.57 to 9,277.90; the American Stock Exchange composite index slipped 5.96 to 708.38; and the S&P 400 midcap index slid 3.19 to 335.64.

The yield on the 30-year Treasury bond closed unchanged at 6.39 percent after falling to 6.33 percent.

Compaq Computer Corp. led a decline in computer shares, sliding $4.25 to $73 after it reported third-quarter profit of 71 cents a share, trailing the most optimistic forecast by 2 cents. Compaq shares are still up 146 percent this year.

On Wednesday, Intel Corp.'s stock lost $8.4 billion of its value after the chip maker's profit fell short of forecasts. Yesterday, Intel fell $1.3125 to $85.375.

More than nine stocks fell for every five that rose on the New York Stock Exchange. About 597 million shares changed hands, above the recent daily average of 530 million.

Merck slid $4.625 to $97.625 after the drugmaker said third-quarter earnings rose 19 percent to $1.20 billion, or 99 cents a share, a penny short of estimates. Sales of Merck's cholesterol drug Zocor didn't match forecasts, partly because of competition from rival drug Lipitor, which is made by Warner-Lambert Co. and Pfizer Inc.

Warner-Lambert rose $1.875 to $142.6875. Pfizer lost $1.1875 to $66.6875.

Sears tumbled $5.8125, or 11 percent, to $48.0625, its biggest one-day slide since the stock market crash Oct. 19, 1987. Sears warned that rising credit-card delinquencies may hurt fourth-quarter earnings. Third-quarter profit matched expectations.

The Morgan Stanley high tech index fell 18.07, or 3.4 percent, to 508.27. Applied Materials Inc. fell $4.8125 to $44.25; Bay Networks Inc. slipped $2.375 to $34.9375; Dell Computer Corp. fell $4.0625 to $98.8125; and Texas Instruments Inc. fell $5.25 to $129.75.

Sun Microsystems Inc. fell $3.3125 to $42.3125. The computer maker reported fiscal first-quarter profit of 41 cents a share, 3 cents short of forecasts, saying a strong dollar hurt international sales.

News of trade tensions between the United States and Japan helped push stocks lower, traders said. The Federal Maritime Commission banned Japanese container cargo ships from the United States and said it will seize Japanese ships moored here. The move may impede trade at the peak season for retailers preparing for the holidays.

The value of freight moved by boat from Japan to the U.S. ports last year totaled more than $80 billion.

MCI Communications Corp. was a bright spot, rallying $1.25 to $38.125 in trading of 29.9 million shares, on news that GTE Corp. offered to buy the long-distance company for $40 a share in cash, or $28 billion. MCI already had agreed to be acquired by British Telecommunications PLC. Yesterday, BT and MCI gave each other permission to hold talks with GTE and WorldCom Inc., who also made a bid for MCI.

British Telecom's American depositary receipts rose $1.125 to $76.125 and WorldCom fell 68.75 cents to $34.75. GTE fell $3.125 to $44.875.

While investors punished companies that fell short of earnings estimates, a majority of U.S. companies have matched or topped earnings expectations so far this quarter. Of the 185 companies in the S&P 500 to report last quarter's profits, 58 percent topped estimates, 24 percent fell short and 18 percent were in line.

Check Point Software Technologies Ltd. rallied $10.125 to $43.625 after the company said third-quarter earnings rose to 32 cents a share from 10 cents a year earlier. The results topped analysts' forecasts for 13 cents a share.

BankAmerica Corp. closed up 18.75 cents to $76.375, relinquishing most of a 2.625-point gain, Chase Manhattan Corp. closed up $43.75 at $123.8125 after surging 2.375 and Banc One Corp. fell 37.5 cents to $56.25 after trading as high as $58.

LIN Television Corp. jumped $4.1875 to $50.75 after closing unchanged yesterday. LIN said it received a bid topping Hicks, Muse, Tate & Furst Inc.'s $1.71 billion offer for the company.

Pub Date: 10/17/97

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