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Disappointed earnings bonds rally Original Source Link: (May no longer be active)
http://www.forbes.com/markets/newswire/2003/10/22/rtr1119623.htmlhttp://www.forbes.com/markets/newswire/2003/10/22/rtr1119623.html
WRAPUP 1-US stocks, dollar feel earnings pain; bonds rally
Reuters, 10.22.03, 7:21 PM ET
By Jan Paschal
NEW YORK, Oct 22 (Reuters) - U.S. stocks sank on Wednesday after disappointing earnings from drug maker Merck & Co. Inc. (nyse: MRK - news - people) and other large companies prompted investors to sell and take profits from the recent rally, while the pain spilled over on the dollar.
The "sell" orders on Wall Street translated into losses of more than 1 percent for the dollar against the euro, Swiss franc and sterling, as well as against the Australian and Canadian dollars. The dollar also fell against Japan's yen.
U.S. Treasury bonds rallied for a fourth straight session, with the 30-year bond's price climbing almost a full point to 103-13/32. Its yield slipped to 5.14 percent from 5.21 percent late on Tuesday.
In New York, gold raced up to $388 an ounce, its highest price since Sept. 30.
Oil futures prices fell more than 1 percent in New York after a bigger-than-expected buildup in U.S. stockpiles of distillates, which include winter heating oil supplies, offset a surprising drop in crude inventories in the latest week.
The Dow and the Nasdaq notched their biggest daily percentage drops in a month as investors worried that much of the positive earnings news has already been priced into the market after a rally off 2003 lows that began in mid-March.
The Dow Jones industrial average <.DJI> sank 149.40 points, or 1.53 percent, to 9,598.24. The technology-packed Nasdaq Composite Index <.IXIC> dropped 42.83 points, or 2.21 percent, to 1,898.07. The broad Standard & Poor's 500 <.SPX> fell 15.67 points, or 1.50 percent, to 1,030.36.
TAKE THE MONEY AND RUN
On Wall Street, a parade of earnings that failed to meet high expectations prompted investors to sell and lock in their profits from the market's recent run-up in share prices.
This week is the busiest for third-quarter earnings.
Merck & Co. Inc. (nyse: MRK - news - people), a Dow member, sank $3.19, or 6.5 percent, to $45.72 after it posted roughly flat third-quarter earnings, falling short of expectations, and said it would cut 4,400 jobs to reduce costs. The drug maker also said full-year earnings would fall short of estimates.
Companies like online retailer Amazon.com Inc. (nasdaq: AMZN - news - people), bank J.P. Morgan Chase & Co. Inc. (nyse: AMZN - news - people) and Amgen Inc. (nasdaq: AMZN - news - people), the world's largest biotechnology company, posted earnings that were higher, but not enough to sustain the hefty run-up in share prices.
"Big-cap pharmaceutical companies disappointed across the board. Amgen disappointed," said Dan McMahon, head of listed trading at CIBC World Markets. "There's no good news today. The valuations are still relatively lofty, given where they've come from in a relatively short period of time. People are just looking to take something off the table."
Online retailer Amazon.com Inc. (nasdaq: AMZN - news - people) tumbled $5.32, or about 9 percent, to $54.03 after the stock's price more than tripled this year. The company reported its first quarterly profit outside of the holiday season and said sales in its current quarter, the biggest of the year, could top Wall Street expectations, but forecast 2004 revenue roughly in line with analysts' forecasts.
J.P. Morgan Chase & Co. Inc. (nyse: JPM - news - people), the No. 2 U.S. bank by assets, fell $1.69, or 4.6 percent, to $34.98. The Dow member said its quarterly earnings rose sharply, but the results were not good enough to sustain the share price, which has risen more than 50 percent this year.
Amgen, the world's largest biotechnology company, sank $3.35, or 5.3 percent, to $60.30. The company reported a quarterly profit on strong sales of its cancer-related and arthritis medicines. But Morgan Stanley cut its rating on the company to "equal-weight" from "overweight."
DOLLAR DROPS, BONDS JUMP
Financial markets ignored U.S. Treasury Secretary John Snow's repeated support for a strong dollar policy and continued to whack the dollar on a belief that no one in the government wants the U.S. currency to strengthen.
"The equities market got off to a bad start and once that happened, stocks acted as a solid dead weight on the dollar for the whole New York trading day," said Alan Ruskin, research director at 4Cast Inc. in New York.
The euro jumped to $1.1805 , up 1.18 percent from Tuesday's New York close. The dollar fell 0.55 percent versus the Japanese currency to 108.87 yen .
At the 5 p.m. close in the U.S. Treasury market, the benchmark 10-year note advanced 23/32 to 99-31/32, while its yield fell to 4.25 percent from 4.35 percent late on Tuesday.
The stock market's misfortune had a boomerang effect on bond prices, which refused to go down.
COMEX gold for December delivery jumped $4.80 to settle at $386.80 an ounce. Earlier, it surged more than $7 to $388, its highest price in more than three weeks. The weak dollar and economic uncertainty have given investors reason to consider buying gold as an alternative investment.
On the New York Mercantile Exchange, the December crude contract fell 40 cents to settle at $29.92 a barrel.
In London, the blue-chip FTSE 100 index <.FTSE> fell 66.7 points or 1.53 percent to finish at 4,285.6.
In Tokyo, the benchmark Nikkei average <.N225> closed below the psychologically important 11,000 mark for the first time in five sessions. The Nikkei ended at 10,889.62, down 1.29 percent.
Copyright 2003, Reuters News Service
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