Stock prices slumped Wednesday for the third day in a row as traders continued fretting about disappointing first-quarter earnings projections by several major companies.
Bond prices dipped, but the bond market showed resilience in the face of a stronger-than-expected report on durable-goods orders.
The Dow Jones industrial average closed down 16.48 points at 3445.38. Broader market indexes also dropped. The Nasdaq composite index of over-the-counter stocks dipped 0.68 points, to 674.36.
As expected, pharmaceutical giant Merck sold off big-time after the company said late Tuesday that 1993 results will be hurt by worldwide health-care cost-containment efforts. Merck, which plans 1,000 job cuts this year, dropped $2.25 to a 365-day closing low of $34.75, dragging down exchange-listed and OTC health-care stocks. At one point Wednesday, Merck traded as low as $32.75.
Locally, Abbott Laboratories and Baxter International were swept up in the health-care selling.
Another beleaguered blue chip, International Business Machines, fell on word that another mainframe computer-maker, Amdahl, expects to report a first-quarter loss. Wall Street was expecting black ink from Amdahl, which closed down $1.50 at $6.50 on the American Stock Exchange. IBM dropped $3.25, to $51.12, on the Big Board.
But troubles among mainframe-makers didn’t infect the entire computer sector. Personal computer-makers Apple and Dell posted gains, as did software-maker Microsoft and microchip-makers Intel and Motorola.
Oil stocks, which until recently were laggards, continued to advance. Chicago-based Amoco added $1, to $57.87. Earlier in the day, the stock set an intraday 365-day high of $58.12.
Bond watch
From the White House to your house, people continue to watch the bond market with an eager and anxious eye. President Clinton wants lower interest rates to spur the economy in ways no government program ever can. Homeowners who haven’t refinanced mortgages hope they haven’t missed the boat.
Wednesday’s bond trading was disrupted a bit by the higher-than-expected report on durable-goods orders. The figures provided good news for the economy but bad news for bond prices, which generally rise on signs of economic weakness.
Analysts said they were impressed by the durability of the bond rally, which has been one of the big surprises of the Clinton administration. Peter McTeague, bond analyst at Technical Data in Boston, said he expects healthy demand for the Treasury’s auction of $11 billion in five-year notes Thursday.
An auction of two-year Treasury notes Wednesday brought a better-than-expected yield of 3.92 percent. Analysts at MMS International said bond prices slipped after the auction.
Corporations and local governments continue to supply the bond market with new securities as they rush to refinance their debt.
Local news
– St. Paul Bancorp of Chicago reached a 365-day closing high of $27, up 62 cents for the day. Chicago Corp. analyst Thomas Maier boosted his rating on the stock to “buy” from “hold,” according to Dow Jones News Service.
– Johnson Products continued climbing on the American Stock Exchange after Tuesday’s upbeat earnings report. The stock rose $4.87 Tuesday and added another $3.50 Wednesday to a 365-day closing high of $46.75.
– Illinois Power advanced 25 cents, to $23.62, after the Downstate utility received permission from the Illinois Commerce Commission to continue paying dividends, despite a threat to its retained earnings. That threat was prompted by an earlier commission order disallowing the company’s plan to charge consumers for costs associated with its Clinton nuclear power plant.
– Milwaukee-based Harnischfeger Industries gained 87 cents, to $18.87, after the company began a program to repurchase up to 2.5 million shares, or 9 percent of the shares outstanding, to place in an employee stock ownership trust.
