GM deal not enough to overcome Dow slide Uncertainty over profits, Clinton keep stocks in the doldrums

July 29, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell for the fifth time in seven days yesterday, amid dimming prospects for corporate earnings and concern that Bill Clinton's presidency could be hobbled by a reinvigorated grand jury investigation into whether he tried to obstruct justice.

The Dow Jones industrial average fell 93.46, or 1 percent, to 8,934.78, paring a 212-point loss. The average was buoyed late in the day by General Motors Corp. -- which reached a tentative labor agreement with the United Auto Workers -- and by Merck & Co., which said it is buying back $5 billion of its shares.

The first decline came as news broke that Monica Lewinsky had been given immunity in exchange for testimony in Kenneth W. Starr's investigation of her relationship with the president. The market's afternoon convulsion also was fueled by disappointment that an expected settlement in the General Motors auto parts strike didn't materialize at a scheduled midday news conference.

The Standard & Poor's 500 index declined 17.03, or 1.5 percent, to 1,130.24. GTE Corp. led a drop in telephone shares after agreeing to be bought by Bell Atlantic Corp. for less than its market value. The Nasdaq composite index lost 36.73, or 1.9 percent, to 1,896.53 -- its biggest drop since April 27.

Among other broad indexes, the Russell 2,000 index of small stocks fell 5.62 to 427.54; the Wilshire 5,000 index dropped 155.19 to 10,515.09; the American Stock Exchange composite index lost 7.48 to 706.69, and the S&P 400 midcap index skidded 6.79 to 347.28.

The Russell 2,000 has declined for eight straight sessions, losing 7.8 percent, and is now down 2.2 percent this year. Three stocks fell for every one that rose on the New York Stock Exchange.

The Sun-Bloomberg Maryland index, which tracks the top 100 Maryland stocks by market valuation, fell 2.38 to 220.99, its lowest finish in five months.

Merck closed down 56.25 cents to $124.50, after falling $4.25. In addition to the stock buyback, the world's biggest drug maker, said it will boost its dividend 20 percent.

GM rose $1.125 to $74.25, after the UAW tentatively agreed to end two Michigan strikes that crippled the automaker and slowed the U.S. economy.

GTE fell $2.6875 to $53.0625 after Bell Atlantic confirmed it agreed to buy the company for $67.5 billion in stock and debt, creating the largest U.S. phone company. The agreement values GTE at $53.99 a share, less than yesterday's close. Bell Atlantic fell 68.75 cents to $44.3125.

Aspen Technology Inc. plummeted $18.75, or 39 percent, to $29.50, after the software company said it expects quarterly earnings to be 33 percent below what analysts expected. The company, which makes software used by petroleum refineries and chemical plants to manage production, said service revenue was slower than expected and expenses rose.

Computer and computer-related companies got clobbered yesterday. Dell Computer Corp. dropped $2 to $108.25; Microsoft Corp. lost $4.50 to $112.25, and America Online Inc. dropped $3.25 to $114.25.

Applied Materials Inc., a semiconductor equipment maker down 27 percent in the past 12 months amid an industry slump, rallied $1.75 to $32.8125.

Major companies, including General Electric Co., declined. GE, which trades at 34 times the past year's profits, fell $1.1875 to $90.8125. Coca-Cola Co., with a price-earnings ratio of 53, dropped $1.4375 to $83.50. Cisco Systems Inc., with a price-to-earnings ratio of 77, dropped $1.50 to $96.

Abbott Laboratories fell 93.75 cents to $42.625 after the company found a flaw in its new batches of the AIDS drug Norvir. Abbott said it will offer Norvir in liquid form while it fixes a manufacturing problem with the pills.

Philip Morris Cos. gained 50 cents to $42.8125 after Morgan Stanley Dean Witter & Co. analyst David Adelman reiterated his "strong buy" rating. He wrote to clients that the "litigation battle has turned," with the tobacco industry prevailing in key rulings.

Pub Date: 7/29/98

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