U.S. Stocks Sink In Sell-Off

Fears about corporate earnings growth, political uncertainty in Washington, and a careening Brazilian stock market sent U.S. shares lower Monday for the fifth-straight session.

The Dow Jones Industrial Average fell 126.16 points, or 1.4 percent, to 8,695.60. The index stood 684.60 points, or 7.3 percent, off its record high of 9380.20 set Nov. 24.

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"I think the momentum is pretty clearly on the side of impeaching Clinton," said Thomas Gallagher, managing director of equity research at Lehman Brothers. "First, there won't be a censure motion on the floor to serve as a middle ground. Also, Clinton's statement last Friday didn't go nearly far enough toward what a lot of Republican moderates wanted to hear."

"We suggest the impeachment hearings are a trading 'buy on the negative event' opportunity," said Paul Rabbitt, president of Rabbitt Analytics, in a research report.

"All other factors are well known, that is the fully invested nature of most parties, stretched valuations, softening industrial sector, weak export markets, slowing job growth, sagging corporate profits, and Japan's economic slide."

"I think most of the market's negative move lately has been over earnings concerns," he said. "I think there would be a short-term negative reaction in U.S. financial markets because of the drama and the gravity of the moment. But I think any negative reaction would be very short-lived, mainly because the outcome in the Senate isn't that hard to figure out."

Galagher figures a vote in the Senate would be very much along party lines. In that case, there wouldn't be enough Democrats to join Republicans to vote to remove Clinton from office.

Monday's overseas action wasn't much help to U.S. stocks. Tokyo's Nikkei 225 index sank 2.0 percent on news that the government will nationalize the shaky Nippon Credit Bank.

In Brazil, the Bovespa stock index plummeted 8.5 percent amid doubt that the government will trim its fiscal budget to the extent necessary to receive the full allotment of its International Monetary Fund aid package. On Tuesday, Brazil will collect the first installment of the $41.5 billion package, some $4.8 billion.

In the U.S. market, the utility segment was the only broad sector to advance, courtesy of lower interest rates in the bond market.

"Most likely, stocks will begin to trade back and forth without any substantial breakdown or breakout moves this coming week," said A.C. Moore, chief investment strategist at Dunvegan Associates. "Should the impeachment process keep stocks from bouncing much over the next several sessions, it would probably set up the usual Santa Claus rally which occurs between Christmas and New Year.

"The first quarter of 1999 is, altogether, another matter and there, the evidence betrays a market which is vulnerable to decline, and not bailed out by positive seasonal trends. Overvaluation and declining earnings are the featured storm clouds."
In Monday's market indicators:

• The Standard & Poor's 500 Index fell 2.2 percent.
• New York Stock Exchange losers edged out winners 3 to 1.
• On the Big Board floor, 700 million shares crossed the tape, 2 percent more than Friday's tally at this time.
• The Nasdaq Composite declined 3.1 percent. Declining issues led advancers by 29 to 11 in the Nasdaq Stock Market. Volume totaled 740 million shares.
• The Russell 2000 Index of small-company stocks sank 1.9 percent.
• In the bond market, the 30-year Treasury rose 23/32, to yield 4.979 percent.

• Mattel (MAT) will purchase educational software developer Learning Co. (TLC) for $33 a share in stock, or about $3.8 billion. Separately, Mattel expects a fall in reorders to cramp fourth-quarter sales and earnings, and anticipates 1998 revenues matching those of 1997. In addition, the toymaker looks for 1998 net to approximate $1.20 a share. Wall Street analysts had counted on $1.78. Shares of Mattel skidded 7 7/8, 26 percent, to 22 1/4 while Learning Co. sank 3 5/16 to 25.
• Britain's National Grid will buy New England Electric System (NES) for $3.2 billion and will assume another $1 billion of New England's debt. Stock of the latter gained 5 1/4 to 48 1/4.
• United States Satellite Broadcasting (USSB) climbed 2 13/16, or 29 percent, to 12 7/16. Hughes Electronics (GMH) will buy the provider of subscription television programming for about $.3 billion in cash and stock. Hughes shares pulled back 1 9/16 to 36 11/16.
• Gold miner Placer Dome (PDG) will acquire Getchell Gold (GGO) for $34.45 a share, or $1.085 billion. Placer shares fell 1 3/4 to 12 5/16, while Getchell soared 11 15/16, or 74 percent, to 28 1/8.
• Physician Reliance (PHYN) will combine with fellow oncology practice management company American Oncology Resources (AORI) in a $652 million transaction. Physician stock dipped 1/2 to 11 and American shares eased 13/16 to 12 3/16.
• Among other specific issues, Seagram (VO) tacked on 13/16 to 36 15/16 after cautioning Wall Street that operating earnings in its fiscal second quarter ending Dec. 31 will likely equal the 2 cents a share of the year-ago period.
• Citigroup (C) fell 1 3/4 to 46. According to The Wall Street Journal, the Dow component will undergo a major restructuring which will involve a charge of about $1 billion and up to 8,000 job cuts, or 5 percent of its total workforce.
• Storage Technology (STK) lost 3 13/16 to 32 3/16 on negative comments from SoundView Financial. The investment broker trimmed its 1998 earnings estimate on the data storage specialist to $2.48 a share from $2.55 and its 1999 profit forecast to $2.09 from $2.14. SoundView also slimmed its investment rating to "hold" from "buy."
• Quorum Health Group (QHGI) shed 5 15/16 to 11. The hospital management concern said second-quarter operating net will be significantly below last year's results of $0.32 a share. Quorum pointed to a disappointing performance in recent acquisitions, the purchase of only two hospitals in fiscal 1998 and operational issues as reasons for its bleak outlook.
• In the oil patch, crude oil prices recovered from last week's 12-year lows. Among oil & gas field services issues, Schlumberger rose 1 1/4 to 44 15/16, Halliburton 1 1/2 to 32 1/4, and Baker Hughes 5/16 to 16 13/16. In the oil & gas drilling group, Transocean Offshore climbed 9/16 to 26 1/8 and Diamond Offshore Drilling 3/4 to 24 1/8.
• Among benchmark computer-related issues, International Business Machines subtracted 5 1/8 to 162 7/8, Lucent Technologies 5 3/16 to 93 3/4, EMC 3 9/16 to 78 1/4, Intel 4 7/8 to 111 9/16, and Microsoft 6 1/16 to 127 15/16.
• Charles Schwab (SCH) rose 2 1/8 to 41 9/16. The stock has been the topic of takeover speculation of late.
• Petersen Cos. (PTN) jumped 7 13/16, or 33 percent, to 31 5/16 on news that the publisher was in merger discussions with British magazine and radio interest EMAP.
• Network Solutions (NSOL) added 9 3/4 to 107 on speculation the company might hook up with an Internet portal site to better market its Internet domain registration service.