Stocks fall on worries over bank, oil profits Plunging Asian markets, low crude prices prompt concern

Dow is down 72

Wall Street

January 07, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks had their biggest drop in two weeks on concern that earnings for banks and oil companies may not live up to expectations.

Citicorp and oil producers, including Exxon Corp., led the retreat.

The Dow Jones industrial average fell 72.74 to 7,906.25, erasing the gains of the first two days of the year. The Standard & Poor's 500 index lost 10.49 to 966.58 and the Nasdaq Composite Index fell 13.98 to 1,580.14.

Among other broad market indexes, the Russell 2,000 index of small-capitalization stocks added 3.96 to 433.10; the Wilshire 5,000 index of stocks on the New York, American and Nasdaq stock exchanges climbed 96.73 to 9,248.53; the American Stock Exchange composite index increased 5.10 to 675.03; and the S&P 400 midcap index gained 4.86 to 328.53.

Bank shares fell after Merrill Lynch & Co. analyst Judah Kraushaar cut his 1998 earnings estimates on Citicorp, Chase Manhattan Corp., BankAmerica Corp. and BankBoston Corp. Kraushaar said the banks' trading revenue will probably be hurt by plunging currencies, bonds and stocks in Asia.

Citicorp tumbled $7.375 to $123; BankAmerica dropped $3.6875 $69.125; Chase Manhattan fell $5.25 to $107.1875; Bankers Trust New York Corp. fell $3.125 to $112.125; and BankBoston slipped $2.375 to $94.625.

J. P. Morgan & Co. fell $5.0625 to $110.9375, leading the Dow lower. The bank said last month that its fourth-quarter earnings were hurt by wild gyrations in the prices of assets it trades, including emerging market debt.

Oil shares dropped for a second day as the lowest crude prices in more than two years spurred concern that profits may suffer. Goldman, Sachs & Co. cut its 1998 forecast for crude oil prices to $17 a barrel from $18, citing a mild winter in Europe and the United States and the prospect of increased oil supplies.

The price of crude oil rose 2 cents a barrel to $16.91 yesterday, though it is down 23 percent since October.

Mobil Corp. dropped $3.1875 to $67.50; Texaco Inc. fell $1.5625 to $51.1875; Exxon slipped $2.1875 to $59; and Amoco Corp. lost $2.75 to $81.375.

Fourth-quarter profit reports begin trickling in this week. Lehman Brothers Holdings Inc. and Morgan Stanley, Dean Witter, Discover & Co. are scheduled to report today, and Aluminum Co. of America, a member of the Dow industrials, tomorrow.

Apple Computer Inc. said it expects fiscal first-quarter profit to be more than $45 million on sales of about $1.58 billion as higher margins and cost-cutting boost results. Its stock rose $3.0625 to $18.9375.

Stocks fell even as bonds rose. On Monday, bonds had their biggest rally in two months, sending the yield on the benchmark 30-year Treasury bond to 5.74 percent. It was the lowest yield since the government began regular sales of 30-year bonds in 1977. Yesterday, the yield fell to 5.72 percent.

Pioneer Hi-Bred International Inc. fell $1.3125 to $106.375 after the world's biggest seed company reported a fiscal first-quarter loss of 73 cents a share.

Union Pacific Corp., the largest railroad in the United States, dropped 62.5 cents to $61.6875 after the Wall Street Journal reported that analysts expect the company to report a fourth-quarter loss of 7 cents a share, or $17.4 million. Six weeks ago, analysts expected a profit of 15 cents, according to First Call.

Federal Express Corp. paced an advance by transportation companies, rallying $2.75 to $63.875 after it announced plans to increase rates on domestic shipments by 3 percent to 4 percent as of Feb. 15.

One of the day's biggest gainers was Inhale Therapeutic Systems, which climbed $3.50 to $31.375. The biotechnology company said it entered an agreement with Eli Lilly & Co. to develop a second pulmonary delivery product. Inhale will receive as much as $20 million in funding.

Hong Kong's Hang Seng index dropped 1.63 percent last night, and slumping Asian stocks continued to be a drag on U.S. share prices.

The Indonesian, Malaysian, Thai and Philippine currencies plunged to record lows for a third day, as companies bought dollars to pay off foreign debts.

Pub Date: 1/07/98

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