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Thursday, October 14, 1999

Stocks plunge again as Intel posts disappointing earnings
Drop of 184.90 extends loss of 231.12 from Tuesday; bond prices drop, pushing 30-year yield to high level
By Eileen Glanton
Associated Press

NEW YORK - Stocks fell sharply for a second straight session Wednesday as Intel's disappointing earnings report hammered technology shares and plunging bond prices dragged the broader market lower.
   The Dow Jones industrial average fell 184.90 to close at 10,232.16, extending its drop of 231.12 on Tuesday. The Dow is down 3.9 percent so far this week.
   Broader stock indicators also closed sharply lower. The Standard & Poor's 500 fell 27.49 to 1,285.55, and the Nasdaq composite index dropped 71.16 to 2,801.27.
   Intel, often considered a bellwether stock for the technology sector, tumbled 4 to 72. The company, the world's largest manufacturer of semiconductors, reported late Tuesday that it earned 55 cents a share in the quarter, 2 cents below analysts' forecasts.
   The results surprised investors who have come to expect Intel to meet or surpass Wall Street forecasts. Other technology leaders also fell, including Microsoft, which fell 1 to close at 91.
   Traders said Intel's report fostered nervousness about other chip makers, which may face production troubles in the coming months as Taiwan, a major producer of semiconductor parts, rebuilds from a recent earthquake. The Philadelphia Stock Exchange semiconductor index fell 2.5 percent.
   Intel also deflated some optimism about corporate profits in general. The companies that comprise the S&P 500 are expected to post average profit growth of more than 19 percent in the third quarter, according to First Call/Thomson Financial. But with expectations high, analysts warn that any companies that miss analysts' forecasts are in line for harsh punishment from investors.
   Embracing the bad
   In recent quarters, however, even companies that have met estimates have faltered if their profit reports contained any hint of trouble. So on Wednesday, trendy retailer Abercrombie & Fitch fell 6 to 26 after saying sales rose at a slower pace than at rival American Eagle Outfitters. Investors brushed off the news that Abercrombie's earnings will meet expectations.
   Stephen Shobin, technical analyst at Lehman Brothers, warned that unless investors can shake lingering nervousness about rising interest rates, earnings may be unable to drive stocks much higher.
   "Wall Street is expecting phenomenal earnings, and that might already be priced into the market," he said. "Right now, investors seem willing to ignore the good news and embrace the bad."
   The bond market provided a major dose of bad news. Prices dropped sharply, pushing the yield on the 30-year Treasury bond from 6.22 percent late Tuesday to 6.27 percent, the highest level since August. The yield briefly touched 6.29 percent, the highest since Oct. 1997. At that level, the bond market can lure investors away from stocks by offering fixed, guaranteed returns.
   Drawn away from U.S.
   Bond prices have been falling as investors worry that rising commodity prices are setting a stage for inflation to escalate. Later this week, government reports on retail sales, producer prices and industrial production are expected to offer the latest signs of whether the buoyant economy is reaching inflationary levels.
   Analysts also said improving global growth prospects are drawing foreign investors away from U.S. equities.
   "There's a real sense that global portfolio managers are shifting away from the U.S.," said David Jones, an economist with Aubrey G. Lanston & Co. in New York. "That's especially true for stocks, but it's certainly not helping bonds."
   The Dow's financial services companies fell along with bond prices. American Express lost 3 to 142 and J.P. Morgan fell 4 to 109.
   Declining issues dominate
   Declining issues outnumbered advancers by a 7-to-3 margin on the New York Stock Exchange. NYSE volume totaled 813.77 million shares as of 4 p.m., compared with 769.11 million in the previous session.
   The Russell 2000 index of smaller companies fell 5.36 to 419.32.
   Overseas markets were mostly lower following Tuesday's selloff on Wall Street. Japan's Nikkei stock average fell 1.9 percent. Germany's DAX index lost 1.2 percent, Britain's FT-SE 100 lost 1.0 percent, and France's CAC-40 closed 1.2 percent lower.

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