Stocks close mixed amid profit worry

THE BALTIMORE SUN

NEW YORK -- U.S. stocks ended mixed yesterday as disappointing earnings at Limited Inc. and AnnTaylor Stores Inc. heightened concern a slower-growing economy is dampening profit growth.

Technology shares gained for a third day amid speculation demand for semiconductors and software will remain steady as companies seek to offset the slowdown by using more efficient computers.

"You've got people questioning the economy's strength," said William Raftery, market analyst at Smith Barney Inc.

Losses in International Paper Co., Chevron Corp. and Texaco Inc. -- so-called cyclical stocks whose performance follows the economy's cycles -- countered gains in International Business BTC Machines Corp. and Walt Disney Co., leaving the Dow Jones industrial average unchanged at 4,693.32, the second time in less than three weeks the index has closed unchanged.

The 30-stock average's performance followed what's become the market's pattern over the past three weeks. After rallying 23.5 percent this year through July 17, the Dow industrials are down 1.4 percent and have traded between 4,754.6 and 4,552.44.

"The market seems to have stalled," Mr. Raftery said. "These are the summer doldrums."

Among cyclical shares that fell, International Paper's stock slipped $1.125, to $85.25, and Chevron shares dropped 75 cents, to $49.

Gains in technology shares, such as Intel Corp., Microsoft Corp. and Adobe Systems Inc. lifted the Nasdaq composite index to 997.12, up 1.90, and approaching its all-time high of 1,010.66.

Among broader indexes, the Standard & Poor's 500 index finished at 560.38, up 0.35. Computer, semiconductor and electrical equipment advanced as oil, drug and automobile issues lagged.

The Russell 2000 index of small companies fell 0.33, to 298.81, and the American Stock Exchange market value index slipped 0.03, to 524.83.

The Wilshire 5000 index rose for a third day, adding 2.76 to reach 5,543.32.

Some 1,146 shares fell compared with the 978 that rose on the New York Stock Exchange.

More than 306 million shares changed hands, compared with some 276 million shares Monday, and below 341.74 million daily average volume over the past six months.

Many retail shares slipped after Limited said second-quarter earnings fell 9.4 percent and that third-quarter profits could drop as much as 30 percent this quarter. The stock declined $1.25, or 6.2 percent, to $19.

Lands' End Inc. was down 25 cents, to $15.125, and Burlington Coat Factory Warehouse sank 25 cents, to reach $13.125.

AnnTaylor Stores Inc. and Dillard Department Stores Inc. also reported earnings yesterday. Shares of AnnTaylor rose $1.875, to $21.875, even though the women's clothing chain reported a wider-than-expected loss. Montgomery Securities analyst Alice Ruth told investors to buy the shares, upgrading her opinion on the stock from "hold" to "buy."

Dillard bucked the trend. The department store chain surprised analysts, reporting that earnings grew 14.2 percent. The shares rose 62.5 cents, to $30.50.

One reason stocks pared gains later in the day was an increase in yields on government bonds, after an auction of three-year Treasury notes drew fewer bidders than expected. Investors had been hoping for strong demand from Japanese investors. That would have suggested that overseas investors will keep buying Treasuries, pushing down their yields. Lower bond yields would make equities a more attractive investment.

Treasury bonds rose early in the day as much as 62.5 cents, or $6.25 per $1,000 bond, pushing the yield to 6.84 percent.

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