New York Market: Companies under pressure
Sunday 07 June 1998
DELIVER or else. That's the mandate US stock investors are placing on the companies they own these days. Report profits that match or exceed expectations, or suffer the consequences.
The Dow Jones Industrial Average is down 2 per cent since setting a record on 13 May. Hewlett-Packard warned after the close of trading that day that it would report disappointing earnings for the three months ended 30 April. The forecast touched off a three-week slide in computer stocks that has dampened the market's overall performance.
As a result, investors are buying shares of retailers that are expected to benefit from a robust economy and electric utilities whose big dividends make returns more attractive. "Forecasts for 1998 profits are dropping so fast that it's natural for people to buy things that they have more conviction in," said Thomas Larsen, a money manager at Desai Capital Management. "We continue to gravitate in the direction of the consumer simply because it's one area of the market where companies are still reporting solid results," he said.
A slump in computer-related shares prevented US stocks from staging a bigger recovery last week. The Dow 30-stock average gained 1.5 per cent, to 9037.71.
Slowing Asian economies are having a two-pronged effect on computer companies. Slumping business activity in the region is cutting demand for new computers and the software and semiconductors that run them. At the same time, Asian producers of computer equipment are unloading their products at bargain prices around the globe, meaning north American and European producers must charge less for their products.
Corporate profits overall are hobbling. Earnings for companies in the S&P 500, climbed just 1.5 per cent in the first quarter from the year before, the slowest pace of growth since the fourth quarter of 1991.
The yield on the benchmark 30-year Treasury bond fell to a four-month low of 5.77 per cent on optimism that low inflation will keep the Fed from raising interest rates, even after a report showed the jobless rate stayed at a 28-year low. Although investors don't have much incentive to buy bonds, they are still doing so.
"Money keeps flowing into the market and there's an absence of inflation," said John Cleland, chief investment strategist at Security Benefit Group. "Those two things will keep damage contained and prevent the collapse of the great bull market."
Copyright IOS & Bloomberg.
Children's bookseller wins The Independent's new author search
Board creates magnetic field to achieve lift
Company reveals $542m investment in start-up building 'a rocket ship for the mind'
Singer says the track was 'force-fed down people's throats'
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Banksy arrest hoax: Internet duped by fake online report claiming artist's identity has been revealed
- 3 Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
- 4 The inventor of the Facebook 'like' button says he never made a 'dislike' button because he feared the 'unfortunate consequences'
- 5 Russell Brand threatened with arrest after filming outside Fox News headquarters
Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
Oscar de la Renta dead: Legendary US fashion designer dies after long cancer battle aged 82
Oscar Pistorius: The brutal prison life that awaits disgraced athlete
Banksy arrest hoax: Internet duped by fake online report claiming artist's identity has been revealed
Super-sized ships arrive in Britain: How big can they get?
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
Lord Freud hangs on as MPs of all parties 'call for his head' over disability comments
iJobs Money & Business
£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...
£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...
£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...
£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...