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.
- 1 Isis burns thousands of books and rare manuscripts from Mosul's libraries
- 2 Scarlett Johansson new band 'already hit with legal complaint' from another The Singles
- 3 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Isis burns thousands of books and rare manuscripts from Mosul's libraries
Husband and wife die holding hands within hours of each other after 67 years of marriage
Mohammed Emwazi: Nine things we know about Isis militant 'Jihadi John'
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
'Jihadi John': Mohammed Emwazi – from British computer programmer to Isis executioner
Oscars 2015: Birdman beats Boyhood as Eddie Redmayne and Patricia Arquette win big - as it happened
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
This is what it's like to be dead, according to a guy who died for a bit
iJobs Money & Business
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...
£22,000 - £23,000: Beverley James: Are you looking for the opportunity to work...
£30,000: Beverley James: A fantastic opportunity has arisen for a person looki...