Earnings, Inflation Worries Trigger Sell-Off
The Dow Jones industrial average slid more than 130 points Wednesday as earnings and inflation jitters multiplied on another day offering little hard news to occupy investors.
The Dow fell 132.63 to 7,719.28, the biggest point drop since the blue-chip barometer plunged 247-points on Aug. 15.
Although the day’s losses were heaviest among the blue chips, the selling spilled over into the broad market, snapping a nine-session streak of record highs by the Russell 2000 index of smaller companies.
Blue-chip shares have been struggling over the past week amid worries about whether third-quarter profits will justify a full recovery to the lofty levels that preceded last month’s downturn.
Of particular concern has been the pronounced economic troubles of many Asian economies and the resulting turmoil on world currency markets, which has boosted the value of the dollar.
That situation presents a two-fold problem for big multinational firms such as Procter & Gamble and IBM - two of the Dow’s biggest decliners on Wednesday - which could be hurt by weaker overseas demand and unfavorable exchange rates as they convert their foreign revenue into dollars.
“The market has been trading (this year) on earnings momentum. If it slows, stocks will go down,” said David Shulman, chief market strategist at Salomon Brothers.
Declining issues outnumbered advancers by more than a 5-to-3 margin on the New York Stock Exchange, where volume was fairly heavy at 516.68 million shares as of 4 p.m., up slightly from Tuesday’s pace.
Some of the stocks that moved substantially or traded heavily Wednesday:
NYSE
Columbia/HCA Heathcare, down 5/8 at 29.
Several brokerages lowered their ratings and earnings estimates for the big hospital chain after Tuesday’s announcement that third-quarter profits will be reduced by $60 million due to costs related to a sweeping probe into Columbia’s billing practices.
Berg Electronics, up 3-7/8 at 47-1/4.
Merrill Lynch upgraded its long-term rating on Berg to “buy” from “accumulate,” the Dow Jones News Service reported.
CKE Restaurants, up 2-3/4 at 39-3/4.
The stock rose for a second day after the restaurant operator posted a second-quarter profit that beat analyst expectations by a wide margin, due in part to strong sales from its Carl’s Jr. chain. CKE is based in Anaheim, Calif.
NASDAQ
Tinsley Laboratories, up 10-1/2 at 21-1/4
The maker of optics and lens systems agreed to be acquired for stock worth $22 a share by Silicon Valley Group, a manufacturer of semiconductor processing equipment. Each share of Tinsley is to be swapped for 0.6594 share of Silicon Valley.