Stocks fall, hit with a case of Big Blues Dow industrials tumble 78 points after IBM's quarter disappoints

Wall Street

January 22, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday after International Business Machines Corp. reported unexpectedly low fourth-quarter earnings and warned that the dollar's strength will hurt profit in the current quarter.

The Dow Jones industrial average fell 78.72 to 7,794.40, after rising 181 points in the previous two sessions. The Standard & Poor's 500 index slid 7.82 to 970.78 and the Nasdaq composite index dropped 2.22 to 1,587.92.

Among other broad market indexes, the Russell 2,000 index of small-capitalization stocks lost 1.42 to 429.89; the Wilshire 5,000 index dropped 65.46 to 9,266.15; the American Stock Exchange composite index slid 3.93 to 669.44; and the S&P 400 mid-cap index slipped 1.88 to 324.58.

IBM fell $8.25 to $100.125, accounting for 30 points of the Dow's drop, after fourth-quarter earnings from the world's largest computer maker fell 4 cents a share shy of forecasts. The computer maker gave analysts a rare warning that first-quarter profits would be lower because of the dollar's strength, slower sales in Japan and higher advertising costs.

Microsoft Corp. fell 81.25 cents to $137. After the market closed, the software maker reported earnings of 85 cents a diluted share, beating the average 82-cent estimate from an analyst survey by IBES International Inc.

The Nasdaq was buoyed by Qualcomm Inc., which rose $6.625 to $54.125 after the maker of telephone equipment said fiscal first-quarter profit more than quadrupled, beating expectations.

Some 1,787 stocks fell and 1,130 rose on the New York Stock Exchange. About 626 million shares changed hands on the Big Board, about 8 percent above the three-month daily average.

Financial stocks fell for a second day. J. P. Morgan & Co., Citicorp and Chase Manhattan Corp. said Tuesday that slumping markets across Asia cut trading profits and hurt fourth-quarter earnings, while Merrill Lynch & Co. said the events in Asia would make 1998 "a more challenging environment for our industry."

J. P. Morgan fell $3.875 to $101.375, making it the second-biggest loser in the Dow, behind IBM. Citicorp fell $2 to $117; Chase Manhattan fell $2.0625 to $105.125; and Merrill Lynch fell 25 cents to $64.75. Wells Fargo & Co. dropped $14.0625 to $315.6875.

Drug shares retreated yesterday, as euphoria cooled over a possible merger of SmithKline Beecham PLC and American Home Products Corp. The Wall Street Journal reported that talks stumbled on disagreements over price and other issues.

SmithKline Beecham closed down $2.4375 at $57.125 yesterday. American Home Products lost $3.6875 to $90.5625 after jumping $13.5625 Tuesday. Pfizer Inc. fell $1.8125 to $79 and Merck & Co. lost $1.50 to $114.

Bell Atlantic Corp. fell 43.75 cents to $90.1875 after the local phone company reported fourth-quarter profit of $1.17 a share, lagging behind the $1.25 that analysts had estimated. SBC Communications Inc. fell 50 cents to $75.0625, and Alltel Corp. slipped $1.0625 to $41.875.

Compaq Computer Corp. rose $2.50 to $32.25 after reporting that its earnings rose 37 percent, in line with forecasts.

Boeing Co. rose 62.5 cents to $44.125 after the aircraft maker said it would take an after-tax charge of $910 million to reduce the value of recently acquired McDonnell Douglas Corp.'s inventories. Analysts expected a charge of between $500 million and $1 billion.

Ascend Communications Inc. fell 93.75 cents to 29.8125. The computer-networking company said fourth-quarter net income fell 26 percent because of weak business in Asia.

Caterpillar Inc. rose $1.875 to $46.875 after topping fourth-quarter earnings estimates by overcoming a slowdown in business in some Southeast Asian countries.

CoreStates Financial Corp. fell $1.3125 to $77.625. The bank, which agreed to sell itself to First Union Corp., said fourth-quarter profit from operations fell 1.5 percent.

Pub Date: 1/22/98

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