Impact of Asia crisis growing Boeing, Callaway, 3M show signs that trouble overseas hurts profits

Wall Street

July 24, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks tumbled as companies from Boeing Co. to Callaway Golf Co. warned yesterday that Asia's economic slump is digging into profits.

"Investors are realizing that we haven't seen the worst of the Asian impact," said Stanley Nabi, chief investment officer of DLJ Investment Management, which oversees $17 billion.

Boeing fell $6.5625 to a two-year low of $41.1875, shaving $6.6 billion from its market capitalization and chopping 27.8 points off the Dow Jones industrial average. The world's largest aircraft maker said slower Asian business and assembly-line problems led to disappointing second-quarter earnings.

Sears, Roebuck & Co. dropped $5.375 to $51.3125 after the top U.S. department-store retailer warned that some of its products didn't move off the shelves as quickly as expected.

Callaway Golf dropped $6.25 to $12.75 after the biggest U.S. golf club maker reported a 55 percent drop in second-quarter earnings and warned that this year's profit would fall well short of estimates, as Asia's economic troubles and weak U.S. demand slow sales. Callaway has fallen 61 percent from its high of $36.375 last October.

Microsoft Corp., up 75 percent this year, fell $3.75 to $113 after rivals of the software giant told a U.S. Senate committee that Microsoft stifles competition by using unfair business practices, including technological glitches that sabotage their products.

Drug stocks fell the most. Pfizer Inc., which has almost doubled in the past year, slid back $4.9375 to $111.4375. Merck & Co. dropped for a third day, losing $1.6875 to $123.4375, after warning earlier in the week that its 1998 profit would be at the low end of estimates. Schering-Plough Corp. fell $3.125 to $97.25.

HBO & Co. fell $5.625, or 17 percent, to $27.25, the worst percentage performer in the S&P 500, after it said it would buy Imnet Systems Inc. for about $270 million. Analysts said investors are concerned that HBO is paying too much for an unprofitable company with $50 million in sales.

Charles Schwab Corp. tumbled $3.625 to $39.25 after Chairman and Co-Chief Executive Charles Schwab told employees that the biggest discount broker isn't for sale. It rallied in the past week after a Wall Street Journal Europe report that a new underwriting arrangement between Schwab and Credit Suisse First Boston could lead to a merger.

Among the gainers, Computer Associates International Inc. rebounded $1.125 to $41.5625 after falling 31 percent PTC Wednesday after the company warned that sales and earnings will slow during the next several quarters because of Asian economic troubles. Yesterday, Morgan Stanley Dean Witter analyst Charles Phillips raised his rating for the No. 3 computer maker to "outperform" from "neutral."

AT&T Corp. rose 93.75 cents to $58.625 after the No. 1 U.S. telephone company said profit from continuing operations rose to 91 cents a share, a penny better than forecasts. Dramatic cost-cutting offset stalled revenue growth.

Philip Morris Cos., virtually unchanged for the past year as a national tobacco settlement emerged and collapsed, gained 31.25 cents to $41.9375. The stock has risen 16 percent in nine weeks.

Intel Corp., enmeshed all year in a semiconductor industry slump, gained 18.75 cents to $82.5625, even after it said the introduction of new models of servers, which control computer networks, will be delayed because of a problem in a new Intel chip.

Minnesota Mining & Manufacturing Co. fell $2.5625 to $78.25 after the maker of Post-it Notes said it will cut 4,000 jobs as its second-quarter profit fell 7.7 percent amid weak Asian markets.

Bell Atlantic Corp. dropped $1.8125 to $44 after the largest local phone company in the country said its profit rose 11 percent, just matching expectations.

Amazon.com Inc. declined $6.375 to $127.625 after the online bookseller reported that its quarterly loss widened as it spent heavily to attract new customers.

Gadzooks Inc. plunged $7.50, or 40 percent, to $11.25 after the seller of teen clothing said fiscal second-quarter earnings will be less than expected because of weak sales of new back-to-school products.

Pub Date: 7/24/98

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