NEW YORK -- U.S. stocks fell for a second day yesterday on concern that prices of the largest U.S. companies aren't justified by the prospects for future profits.
Corning Inc. was among the biggest decliners, after it said earnings for the rest of the year would fall short of expectations. After trading closed, Motorola Inc. warned that its third-quarter earnings will be "significantly" below estimates.
"You've got a lot of multinational companies that aren't going to match earnings estimates," said Douglas Raborn, chairman of Raborn & Co., in Delray Beach, Fla., which oversees $125 million. "Investors are marking down all stocks on that same issue."
As the dollar rises against other currencies, U.S. exports become more expensive. And, as Thailand and other Southeast Asian economies suffer through a currency crisis, businesses in those countries may cut prices to attract dollars and stabilize their economies.
The Dow fell 58.30 to 7,660.98 after having been as low as 7,580.85, and the Standard & Poor's 500 index dropped 6.44 to 912.59. The Nasdaq composite index resisted, rising 0.62 to 1,639.87. It was the biggest two-day drop for the Dow and the S&P; in nearly four weeks.
Corning fell $5.375 to $42 after it said lower-than-expected growth in its optical-fiber and cable businesses will hurt earnings.
Motorola plunged $7.25 to $67.25 in off-exchange trading after it said its earnings will be lower than analyst estimates.
The decline was emphatic, with two stocks falling for each that rose. The Russell 2,000 index, which tracks the progress of small stocks, fell for a second day after gaining in 11 straight sessions. Yesterday, it declined .97, to 435.93.
Helping the market recover were comments by Goldman, Sachs & Co. investment strategist Abby Joseph Cohen, who said stocks will recover from recent declines and climb to new records.
"We reached a plateau, and I think it will take a little time before we return to the summits, but we shouldn't go much lower," she said in an interview with Investor, a French business magazine. "Based on profit estimates for the coming two years, I would say Wall Street is notably undervalued."
While the indexes were mostly down, they were pushed and pulled by program trading. Seven "buys" and five "sells" accounted for an 8-point decline in the Dow.
Analysts attributed the heavier-than-usual trading to today's "triple witching hour," when stock options, options on index futures and index futures expire simultaneously. Orders to buy or sell big quantities of stocks can lead to imbalances in supply and demand, which can cause prices to change dramatically.
Regal Cinemas Inc. gained 87.5 cents to $25.8125. It fell earlier after it said earnings will be 7 cents below analyst forecasts.
Ascend Communications Inc. dropped $2.1875 to $37.8125 and was the most-active stock in U.S. composite trading, on concern that the networking company will miss third-quarter profit estimates because of weak sales of its main product.
Not all the news was bad. Adobe Systems Inc. rose $3.5625 to $44.5625 after the software developer said it expects earnings to exceed analyst forecasts, which range from 42 cents to 49 cents a share.
Rohr Inc. rose 68.75 cents to $28.50 after it said it is in talks to be acquired by an unidentified company for $847 million, or $30.25 a share.
Fieldcrest Cannon Inc. rose 62.5 cents to $34.125. Pillowtex Corp. agreed to acquire the maker of Royal Velvet towels for $34 a share. Fieldcrest has gained 81 percent in the past two months.
Bell Sports Corp. rose 43.75 cents to $9.6875 after the bicycle helmet maker said it hired Montgomery Securities to review options, including a sale of the Scottsdale, Ariz., company.
Viacom Inc. fell 75 cents to $32.50 after it was downgraded to "market perform" from long-term "attractive" by Keith Benjamin at Robertson, Stephens & Co.
Pub Date: 9/12/97