WALL STREET IBM fall keeps market reeling

Press, 21 July 1986, Page 28

WALL STREET IBM fall keeps market reeling

NZPA-AP

New York

The New York stock market lost ground in a choppy session on Friday after the modest advance of Wednesday and Thursday faded. The Dow Jones average of 30 industrials slipped 3.80 points to close at 1777.98, bringing its loss for the week to 43.45 points. The index has fallen 131.05 points since July 2. Declining issues outnumbered advances nearly four to three on the New York Stock Exchange. On Wednesday and Thursday, the market made attempts to rally from its sharp declines earlier in the month. But each time, the up-swings failed to attract much support. This reinforced the belief of many analysts that stocks are not yet ready to shrug oft their early-July losses and resume the bull market that began almost four years ago.

On Friday, Merrill Lynch, one of the biggest American brokerage companies, lowered its forecast of economic activity for the second half of the year. Brokers also said the

filing on Thursday by LTV Corp, for protection under chapter 11 of the Federal bankruptcy laws underscored the problems facing the industrial and energy sectors of the American economy.

On Monday, investors’ confidence, shaken by the market’s poor performance the previous week, suffered a setback when

International Business Machines reported weaker-than-expected earnings for the second quarter. The Dow Jones industrial index fell 27.98 points on Monday, closing at 1793.45, bringing its loss from July 2 to 115.58 points. IBM said its profits came to SUS2.I2 a share, down from SUS2.3O in the comparable period last year. The chairman, Mr John Akers, said the drop reflected the sluggish pace of North American business activity. "Without an improvement in capital spending in North America, it will be difficult to show earnings grovrth in 1986,” he added. On Tuesday, the stock of IBM was delayed in opening on this due to a flood of sell orders. Orders were matched later and the stock opened with just a small loss, trading down % at 138%. (It closed at 139*4 °n Monday, down 3% points.) One trader said Wall Street’s reaction a day later was that the earnings looked “even worse than originally perceived.”

The Dow Jones fell 24.75 points. On Wednesday, the market staged a modest advance, rebounding from the steep drop of the previous eight sessions. The Dow Jones edged up 5.48 points to 1774.18.

Evidence continued to accumulate of sluggishness in the American economy. The Federal Reserve Board reported that American industry operated at 78.3 per cent of capacity in June, down from 78.9 per cent the month before.

Brokers have expressed concern that a long-espected pick-up in business activity may not materialise as a primary force behind the market’s recent slide.

On Thursday, stock prices rose moderately. However, broad measures of U.S. economic activity continued to show the sluggishness. The Commerce Department reported that housing starts dropped 0.8 per cent in June, to their lowest since November, 1985. So far in 1986, housing has been one of the strongest sectors of the economy.

The Dow Jones rose 7.60 points, closing at 1781.78.

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