Stocks end day mixed amid concerns Dow, S&P fall, Nasdaq up as interest rates, profit growth cause worry

March 26, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks were mixed yesterday as concern over higher interest rates and slowing profit growth dragged the Dow Jones industrial average back from a run at 9,000.

Drugmakers and banks declined on concern that their earnings will fall short. Computer and software shares gained after Microsoft Corp. said profit for this quarter will top forecasts.

The 30-stock Dow average fell 31.64 to 8,872.80, after coming within 41 points of 9,000. The Standard & Poor's 500 index fell 3.73 to 1,101.92, after reaching an all-time high of 1,113.07, but the Nasdaq composite index rose 12.07 to a record 1,824.51.

Among other broad market indexes, the Russell 2,000 index of small capitalization stocks rose 0.88 to 477.14, a record; the Wilshire 5,000 index dropped 19.43 to 10,487.78; the American Stock Exchange composite index slid 1.80 to 736.89; and the NYSE composite index fell 2.20 to 572.76.

The S&P 400 midcap index added 1.07 to 368.51.

The Bloomberg Maryland index, which tracks the top 100 stocks in Maryland by market valuation, slipped 0.13 to 236.01.

Declining stocks outnumbered those that rose on the New York Stock Exchange by a 15-to-14 ratio, in volume totaling 676.5 million shares, up from 605.7 million Tuesday.

Wall Street analysts say U.S. first-quarter corporate earnings will rise at the slowest pace since the recession eight years ago because of higher wages, lagging productivity and price cutting brought on by Asia's economic troubles.

Also, a government report yesterday showed a bigger-than-expected jump in home resales, a sign of possible inflation, which is bad for stocks. A Treasury auction also hurt stocks when demand for bonds was weaker than usual, driving up yields.

The yield on the benchmark 30-year Treasury bond rose to 5.94 percent, from 5.88 percent Tuesday.

J.P. Morgan & Co. led the Dow's decline, falling $2.0625 to $134.8125. Chase Manhattan Corp. lost $1.1875 to $133 and BankAmerica Corp. dropped $1.8125 to $83.875.

Some drugmakers fell after Salomon Smith Barney analyst Christina Heuer downgraded Eli Lilly & Co. to "outperform" from "buy" because earnings growth could shrink. She also said earnings at Merck & Co. will be squeezed by weak new drug sales and expiring patents on old ones.

Lilly fell $1.50 to $61, and Merck lost $1.875 to $130.

Mattel Inc. fell $2.5625 to $40.875 and Hasbro Inc. dropped $3.3125 to $35.0625 after the two biggest U.S. toymakers warned that first-quarter sales will be below forecasts because of lower orders from Toys 'R' Us Inc., their largest customer. Toys 'R' Us is keeping inventory low as it faces competition from Wal-Mart Stores Inc.

Microsoft rose $3.875 to $88.8125 after the company said robust sales of business software are boosting revenue.

Chief Financial Officer Greg Maffei said per-share earnings will be about 4 cents higher than analysts' average estimate of 44 cents for the fiscal third quarter ending March 31.

Some computer-related companies gained as the Microsoft news offset warnings on profits earlier this month from chip maker Intel Corp. and PC maker Compaq Computer Corp. Intel rose $1.8125 to $76.25; Compaq rose 68.75 cents to $26.25; and Dell Computer Corp. gained $2.1875 to $67.9375.

International Business Machines Corp. rose $2.5625 to $106.0625, leading advancers in the Dow.

The gains come amid disappointments in the industry. 3Com Corp. fell $1.75 to $35.50 after it said fiscal third-quarter profit dropped 95 percent as it cut shipments to distributors to reduce inventory built up by declining sales of modems and other networking products.

The NYSE composite index fell 2.20 to 572.76.

Pub Date: 3/26/98

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