Stocks plummet on earnings concerns; Dow retreats from 8,000
NEW YORK (AP) _ The Dow Jones industrial average stumbled in its pursuit of 8,000 Wednesday, dropping sharply on worries about glowing corporate profit forecasts after coming within 10 points of the milestone.
After an opening rally that took the Dow to 7,991.26, the Dow dropped as much as 167.38 in the final hour of trading. It was bouncing off that low at the closing bell, when the average of 30 blue-chip stocks was off 119.88 at 7,842.43.
The drop from Tuesday’s record of 7,962.31 amounted to a loss of 1.5 percent. The selloff more than erased the previous day’s 103.82-point surge.
Declining issues outnumbered advancers by a 3-to-2 margin on the New York Stock Exchange, where volume totaled 589.08 million shares as of 4 p.m. vs. 525.65 million in the previous session.
While the Dow and broad-market indicators mostly fell from Tuesday’s records, the technology heavy Nasdaq composite index rose to new heights.
Traders attributed Wednesday’s decline to investors reaping profits from Tuesday’s surge, compounded by computer-driven sales and fear that the previous session’s jump was overblown.
``There’s bound to be some profit-taking once in a while,″ said Eugene G. Mintz, financial markets analyst at Brown Brothers Harriman.
``There wasn’t much substance to yesterday’s rally,″ said Ned Riley, chief investment officer at the Bank of Boston. ``If you took the two days together it would be a normal two-day period, whatever a `normal period’ is these days.″
With no major economic data scheduled for this week until Friday’s reading on wholesale prices, the market is closely watching earnings reports for signs of the pace of growth in the just-ended second quarter.
Wells Fargo & Co. shares tumbled 6.6 percent after it said earnings would be below Wall Street’s expectations, and other bank stocks also suffered. The San Francisco-based bank fell 18 3/8 to 260 5/8, while BankAmerica fell 2 to 66 3/16, Chase Manhattan was off 1 1/4 at 101 3/4 and Citicorp was down 1 3/8 at 126 13/16.
Trading has been a tug-of-war between traders bullish on recent rosy economic reports and bears who feared earnings disappointments, said John Shaughnessy, research director at Advest Inc. in Hartford, Conn.
``I think what the market’s saying today is let’s not get carried away on second-quarter earnings, let’s see what the earnings are first,″ he said.
The Dow, which topped 6,000 in October and 7,000 in February, has already risen more than 20 percent in 1997.
Leading the Dow decliners were Merck, down 2 3/4 at 101 3/16; AlliedSignal, down 2 1/2 at 84 7/8; and DuPont, down 2 1/16 at 63.
Technology stocks bucked the trend to reach record highs, with IBM up 1/2 at 96 1/4 and Hewlett-Packard up 3/16 at 57 15/16. The two tech stocks and Boeing, up 1/16 at 56 3/16, were the only Dow industrial stocks to rise.
The Standard & Poor’s 500 list was down 11.14 at 907.61.
The NYSE composite index was down 5.46 at 473.03. The American Stock Exchange composite index was down 3.09 at 631.02.
The Nasdaq composite index rose 1.77 to a new high of 1,486.87.
Overseas, Tokyo’s Nikkei stock average closed down 0.8 percent. Frankfurt’s DAX index was up 1.2 percent and London’s FT-SE 100 was up 0.1 percent.