NEW YORK -- Stocks were mixed yesterday as big drug and beverage companies, favorites in recent months for their relatively stable earnings growth, declined amid concern that their prices overestimate profit potential.
Forecasts of strong earnings growth at International Business Machines Corp. and Sun Microsystems Inc. boosted computer shares.
The Dow Jones industrial average closed up 1.11 to 5,712.38, after gaining 15.91. The Dow industrials would have fallen for the day without IBM's surge, which contributed 8.51 points.
The broader Standard & Poor's 500 index fell 1.59 to 664.81, dragged down by PepsiCo Inc. and Amgen Inc. The Russell 2,000 index of smaller shares gained 1.86 to 335.61; the Wilshire 5,000 index, a gauge of stocks traded on the New York and American stock exchanges and the Nasdaq market, dropped 1.43 to 6,534.14; the American Stock Exchange market value index rose 1.34 to 563.39; and the S&P; midcap index rose 1.24 to 234.41.
Advancing shares outnumbered those that declined by 1,258 to 1,032. Trading was among the slowest full sessions this year on the New York Stock Exchange at 296.4 million shares.
Amgen shares fell $1.625 to $60 amid concern about possible competition for one of its best-selling drugs from a rival medication in development at a start-up company. Transkaryotic Therapies Inc.'s product would compete with Amgen's Epogen, used to help kidney disease patients.
PepsiCo sank $1 to $30 in trading of 13.9 million shares. Merrill Lynch & Co. analyst Allan Kaplan said yesterday that lower sales in Venezuela, Japan and Saudi Arabia will hurt the soft-drink company's earnings this year and next. Kaplan reduced his 1996 earnings estimate to $1.40 a share from $1.45, and cut his long-term growth forecast to 14 percent from 15 percent.
Drugmaker Pfizer Inc. slid 37.5 cents to $73.50; Johnson & Johnson lost 50 cents to $50.375; and American Home Products Corp. retreated 87.5 cents to $60.25.
Coca-Cola, the top soft-drink maker, fell 37.5 cents to $51.25, its third slide in four days. Coke stock is trading at almost 37 times estimated earnings.
Salomon Brothers' upgrade of IBM to "strong buy" from "buy" boosted the No. 1 computer-maker's shares $4.125 to $115.875, including after-hours trading off the NYSE floor. IBM ended trading on the NYSE, whose quotes are used in calculating the value of the Dow industrials, at $114.625, up $2.875.
Sun Microsystems Inc. gained $2.625 to $56.375 after Alex. Brown Inc. raised its fiscal first-quarter profit estimate to 65 cents a share from 55 cents for the quarter ending next month.
Digital Equipment Corp. climbed 87.5 cents to $38.125 after the company said it would sell a stake in its AltaVista Internet Software Inc. to the public for about $50 million.
Shares of Fleetwood Enterprises Inc., the nation's largest maker of recreational vehicles and manufactured housing units, said its fiscal first-quarter earnings jumped to 64 cents from 44 cents in the same quarter a year earlier. The increase topped analysts' average estimate of 58 cents. Shares of Fleetwood rose 50 cents to $29.25.
Disappointing earnings couldn't stop Baby Superstore Inc., which rose $1.375 to $16 after falling to $13.125. The retailer said it lost 61 cents a share in the second quarter, compared with net income of 15 cents a share in the same quarter a year ago. Investors saw brighter prospects ahead.
Cable Design Technologies, a maker of copper cables, rose $3.9375 to $34.0625 on top of Tuesday's 37.5-cent gain, after it said its earnings would come in the upper range of estimates. The company is expected to earn between 34 cents and 39 cents a share, according to Zacks Investment Research.
Pub Date: 8/29/96