Dow Dips but Nasdaq Hits Record

Stocks closed mostly lower Wednesday as concerns about profit shortfalls hit such blue-chip names as Merck, Procter & Gamble and Coca-Cola.

But the Nasdaq composite index rose to a new high, boosted by technology names.

The Dow Jones industrial average eased 18.79 points to 9,009.19.

Drug giant Merck, which sank $6.75 to $151.94, dragged down the Dow. Merck told analysts to lower their 1999 profit estimates slightly because it’s hiring new salespeople as it prepares to introduce its most important new product, an anti-arthritis drug called Vioxx.

CEO Raymond Gilmartin said per-share profit could be $4.27 to $4.34 in 1998 and $4.85 to $4.95 in 1999. Merck was expected to earn $4.30 a share this year and $4.97 in 1999, according to the average estimates of analysts surveyed by First Call.

Some other consumer product giants that depend on markets abroad fell on concern that slowing growth in Russia, Asia and Latin America is crimping earnings.

“In terms of the U.S., [consumer product companies] are OK, but internationally they are not doing as well as expected,” said Joe Stocke, portfolio manager at Meridian Investment in Valley Forge, Pa. “When you average the two, you get disappointing earnings.”

Procter & Gamble slid $2.63 to $84.13 after Bear Stearns analyst Constance Maneaty warned that weakness in Russia and competition in Europe are hurting sales this quarter. She cut her rating on the stock to “neutral” from “attractive.” P&G; gets half its sales outside the U.S.

Coke, which gets 70% of its sales abroad, lost $1.50 to $67.13. Merrill Lynch analysts said sales growth at the world’s largest soft-drink company will be slower through the first half of 1999.

On the plus side, the tech-heavy Nasdaq composite gained 15.67 points, or 0.8%, to a record 2,050.42.

Computer companies keep spreading the word that business is better than expected. “We all had concerns about Asia, and they’ve told us they’re going to do fine over there,” said George Cohen, chief investment officer at Cohen, Klingenstein & Marks.

Microsoft rose $2.44 to $133.63, Dell Computer gained $1.50 to $68.13 and Oracle rose $1.31 to $36.63.

And many Internet-related names continued to soar, including Lycos, up $3.38 to $61.25; Broadcast.com, up $15 to $69.75; and Amazon.com, up $12.19 to $216.25.

But in the overall market, losers edged winners on the New York Stock Exchange and on Nasdaq.

“We’re doing this end-of-the-year fade, where everybody’s sitting on the sidelines,” said Arthur Hogan, senior sales trader at Jefferies in Boston.

In the bond market, yields closed mostly lower after the Federal Reserve said U.S. economic growth has slowed recently. The 30-year Treasury bond yield fell from 5% Tuesday to end at 4.98%--its lowest since Oct. 19.

Another drop in key commodity price indexes also helped bonds.

In foreign trading, South Korean shares continued to rebound, with the main index rising 3.3% to 526.52--the highest since March. The Korean government said it will repay $2.8 billion of International Monetary Fund loans that come due this month, to send a signal abroad that it’s overcoming its currency and economic crisis.

Among Wednesday’s highlights:

* Chevron, a Dow stock, jumped $3.75 to $86.19 on speculation that the oil giant may be a takeover target of Royal Dutch/Shell.

Other oil stocks were marginally higher, but Atlantic Richfield gained $2.25 to $67.75 and Texaco rose $2.25 to $57.50.

* AT&T; surged $4 to a record $71. It agreed Tuesday to buy IBM’s global communications network, which should help offset AT&T;’s slower-growing phone services.

But most regional telephone stocks fell after the Wall Street Journal reported that the Federal Communications Commission may block planned mergers between SBC Communications and Ameritech, and Bell Atlantic and GTE.

SBC fell 50 cents to $49, though Ameritech gained 50 cents to $56.75. Bell Atlantic dropped $1.88 to $56.13 and GTE declined 75 cents to $65.25.

* Among financial issues, J.P. Morgan dropped $2.38 to $104.19 after the bank said its fourth-quarter operating profit will be about half of what analysts expected because of weak results in its proprietary trading.

The No. 4 U.S. bank said it will make less than the 58 cents a share it earned from operations in the third quarter; analysts surveyed by First Call expected a profit of $1.03.

* Headlands Mortgage surged $4.75 to $21.75 after GreenPoint Financial agreed to buy the mortgage-banking company for about $473 million in stock. The transaction values Headlands at about $23.10 a share.

* Two stocks--Parker Hannifin and Russell Corp.--could be hurt today by the companies’ separate warnings late Wednesday of near-term earnings weakness. Parker rose 75 cents to $31.81; Russell fell 63 cents to $20.13.

Market Roundup, C8