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Dow Gives Up 63 as Stock Rally Ends

October 14, 1998| From Times Wire Services

Stocks ended a two-day rally Tuesday amid jitters about corporate earnings, and bond prices gave up early sharp gains to end moderately higher.

The yen fell against the dollar on doubts over Japan's plans to bail out its debt-laden banks and the dollar fell against the German mark on continued fears of a global recession.

The Dow Jones industrial average declined 63.33 points to 7,938.14 after soaring nearly 270 points in the previous two sessions.

In the broader market, decliners beat advancing stocks 1,759 to 1,296 on active volume of 733.31 million shares on the New York Stock Exchange.

The technology-stock-heavy Nasdaq composite index fell 36.63 points to 1,509.45.

"Since Thursday afternoon, we have had 2 1/2 days of the market moving significantly higher, so it's not unusual for it to pause and catch its breath a little bit," said Harvey Hirschhorn, chief economist and investment strategist at Stein Roe & Farnham.

The day's stock slide was set off by profit-taking in the technology sector, a tumble in Dow component Eastman Kodak--which accounted for more than half the Dow's losses--and the collapse of plans for a merger between giants American Home Products and Monsanto.

As overseas markets settled a bit, attention turned to domestic corporate earnings as the reporting season got underway in earnest.

"Which stories have good earnings is what's going to drive the market over the next month or so," said Peter Gottlieb, vice president and portfolio manager at First Albany Asset Management.

Investors focused on company comments on the outlook going into 1999 to see if business conditions may worsen.

First Call, which tracks earnings estimates, has forecast that the third-quarter earnings for companies in the Standard & Poor's 500 will be the worst in seven years.

As expected, brokerage houses took a beating, posting dismal results amid the turmoil in global financial markets. Analysts said the difficulties may not be a one-quarter phenomenon.

"Because of the uncertainties now apparent in the global economy, we anticipate a much more challenging environment ahead," Merrill Lynch Chief Executive David Komansky said.

The yield on the benchmark 30-year Treasury bond fell to 5.09%, down from 5.11% on Friday. The bond market was closed Monday for the Columbus Day holiday.

The dollar was at 119.15 yen in late trading, up from 117.63 on Monday. It fell to 1.6336 German marks from 1.6516.

Among Tuesday's highlights:

* Computer-related shares fell, ending a two-day rally that had boosted the Nasdaq composite by 9%. Intel, the world's largest maker of computer chips, fell $1.88 to $83.56, before reporting earnings after the close of trading. IBM fell $2.69 to $128.19, Microsoft dropped $3.31 to $96.44, and Dell slipped $3.06 to $53.

PeopleSoft fell $4.25, or 18%, to $18.88 after the second-largest maker of business-management software canceled its appearance at an investment conference.

But Apple Computer rose $1.31 to $38.75. The company is expected to report its first annual profit in three years and to unveil a new operating system for its Macintosh computers today. * K2 shares fell 30% to a 52-week low after the company warned of lower-than-expected third-quarter earnings because of poor sales of its expensive bicycles. The Los Angeles-based maker of skis, snowboards, in-line skates and other sporting goods plunged $4.31 to $9.88.

* General Motors slipped 88 cents to $51.06 after the car maker, as expected, reported a loss because of crippling labor strikes over the summer that cost it $1.2 billion.

In commodity trading, grain, soybean and pork prices rose sharply after U.S. officials said they were in talks with Russia on the possibility of a food aid package for the financially strapped country.

Overseas, London's FTSE-100 index dipped 0.9%, and Tokyo's benchmark Nikkei-225 stock average declined 2.3%.

Market Roundup, C9

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