Dow Rebounds On Earnings Reports

Investors sifted through a mixed batch of third-quarter earnings reports Wednesday, opting to view the glass as half-full.

That sent U.S. shares steadily higher for most of the day before a wave of selling in the final-hour slimmed the day's gains.

The Dow Jones industrial average closed up 30.64 points, or 0.4 percent, to 7,968.78. The index has swung between 8,200 and 7,400 since the start of September.

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"What you're seeing is a lot of people starting to feel nervous that they've missed the bottom in stocks," said Ben Marsh, managing director and head of equities trading at Adams Harkness & Hill Inc. "The bad news on earnings is out and people have expected it."

By late morning, 83 companies, or 17 percent, of those in the Standard & Poor's 500 index had reported quarterly profits, according to I/B/E/S Inc. On balance, the results show earnings fell 6.5 percent from the year-ago quarter.

Trading volume swelled from that of Tuesday, a bullish sign. The action in the Nasdaq Composite comforted market bulls, advancing 2.1 percent on a 12 percent pick-up in volume. A pair of Street-beating earnings readings from bellwethers Intel and Compaq Computer contributed to a tech rally.

Utility shares headed higher, while bank issues pulled back after a poor earnings report from BankAmerica proved a reminder that the industry's exposure to hedge funds remains a question mark.

Overseas, Tokyo's Nikkei 225 index dropped 1.3 percent to 13,070.73. Hong Kong's Hang Seng index gave back 1.9 percent on profit-taking after a recent run-up.

In Wednesday's market indicators:

  • The Standard & Poor's 500 Index rose 1.1 percent.
  • New York Stock Exchange winners bettered losers by more than 3 to 2.
  • On the Big Board floor, turnover rose 8 percent to 789 million shares.
  • Advancing issues led decliners by 11 to 9 in the Nasdaq Stock Market. Volume totaled 743 million shares.
  • The Russell 2000 Index of small-company stocks gained 1.5 percent.
  • The 30-year Treasury surged 1 7/32 points, to yield 5.01 percent.

Among the stocks in the news:
  • Intel (INTC) gave back 1 to 82 9/16. After Tuesday's close of activity, the semiconductor titan said it netted 89 cents a share in the third quarter, a penny better than what it earned in the year-ago quarter. Wall Street's consensus estimate was 80 cents. Intel said second-half sales should be above the first-half level. But it also pointed to fourth-quarter revenues just slightly higher than the third quarter, raising concerns among some analysts.
  • Compaq Computer (CPQ) netted 7 cents a share in the third quarter, besting Street expectations by a penny, but below the 33 cents earned in the year-ago quarter. Revenues grew 36 percent. Compaq said its merger with Digital Equipment remains on track. The shares put on 15/16 to 25 7/16.
  • Pharmaceutical concern Pfizer (PFE) gained 8 3/4 to 96 1/4 after posting third-quarter operating net of 51 cents a share, 6 cents shy of what most analysts on Wall Street had looked for. Pfizer attributed the earnings disappointment to lower-than-expected drug sales. PaineWebber upgraded its opinion of the stock.
  • BankAmerica (BAC) fell 5 15/16 to 48 after reporting third-quarter results of 50 cents a share, drastically below the Street's consensus forecast of 90 cents. The bank took a $372 million charge related to trading losses by hedge fund D.E. Shaw. The company said its exposure to hedge funds is in the neighborhood of $400 million.
  • Apple Computer (AAPL) surrendered 1 3/8 to 37 3/8. It checked in with fiscal fourth-quarter results of 68 cents a share, blowing away the consensus view of 49 cents, and far better than the $1.26-a-share loss of a year ago. Unit shipments escalated 28 percent on a year-over-year basis.
  • Ford Motor (F) drove up 1 11/16 to 45 3/4. It beat most analysts' estimates by a penny with its third-quarter net of 80 cents a share. Revenues shrank 10 percent. In a statement, Ford said: "...the fundamentals for the automotive industry in the U.S., our largest market, continue to be solid."
  • Seagate Technology (SEG) pulled back 3 5/16 to 22 9/16 after besting most projections by 2 cents with its fiscal first-quarter pro forma operating profits of 19 cents a share. Sales at the computer disk drive manufacturer fell 18 percent.
  • PepsiCo (PEP) depreciated 1 1/2 to 30 1/2. It came in 3 cents short of most analysts' views with its third-quarter operating net of 37 cents a share. That was 2 cents above the year-ago period. See full story.
  • Brokerage firm Bear Stearns (BSC) retreated 11/16 to 32 1/8. It logged a fiscal first-quarter profit of 40 cents a share. The Street had anticipated 43 cents. Bear blamed ebbing bond trading activity and a drop in bond and stock underwriting fees. It said its exposure to emerging markets was not significant.
  • Semiconductor manufacturer LSI Logic (LSI) edged 1/4 lower to 11 7/8. It topped most estimates by a cent when it reported third-quarter operating eanings of 14 cents a share. LSI laid off about 1,200 workers, or 17 percent of its total workforce, and closed a few plants in a cost-cutting move to stay competitive.
  • First Union (FTU) appreciated 3/16 to 50. The Charlotte, N.C.-based bank recorded $1.02 a share in third-quarter profits, outdoing Street views by 6 cents. It earned 87 cents in the same period of 1997. Muted exposure to overseas markets allowed First to beat the consensus earnings estimate. The Street eyes earnings growth of 14 percent and 16 percent in 1998 and 1999, respectively.
  • Internet-related issues advanced. Yahoo! was ahead 1 15/16 to 111 7/8, America Online 3 3/8 to 95 5/8, Amazon.com 2 1/8 to 93 1/2, Inktomi 4 5/8 to 83 7/8, Excite 1 11/16 to 34 5/8, and Lycos 1 1/16 to 28 9/16.
  • Lucent Technologies (LU) picked up 2 3/8 to 66 13/16. CIBC Oppenheimer started coverage with a "buy" recommendation and a 12-to-18 month price target of $75. The broker cited relatively high revenue and earnings growth visibility due to long-term contract commitments, breadth of product line, and good operating leverage.