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Strong Earnings Fail to Bolster Stocks

Posted on: Tuesday, 13 April 2004, 06:00 CDT

NEW YORK - Booming retail sales and strong earnings from blue chips Johnson & Johnson and Merrill Lynch weren't enough to sustain buying momentum on Wall Street Tuesday as investors collected profits from Monday's strong gains.

The Commerce Department reported a 1.8 percent increase in retail sales for March, the biggest jump in a year and far better than the 0.6 percent economists expected. Consumer spending increased across the board, fueled by tax returns, an improving employment picture and low interest rates.

"This shows the strength and consistency of consumer spending," said John Lynch, chief market analyst at Evergreen Investments. "It's broad based, and it's not just consumers. Businesses are increasing their spending as well."

While the retail data helped the markets open higher, the major indexes quickly slipped into negative territory. In late morning trading, the Dow Jones industrial average was off 37.17, or 0.4 percent, at 10,478.39.

Broader stock indicators also slipped. The Standard & Poor's 500 index was down 4.82, or 0.4 percent, at 1,140.38, and the Nasdaq composite index fell 13.93, or 0.7 percent, to 2,051.55.

Healthcare products maker Johnson & Johnson and investment firm Merrill Lynch & Co., two closely watched stocks, both surpassed Wall Street expectations, but boosting optimism could be difficult due to investors' higher expectations.

"Investors want to be awed. It's come to that, quite frankly," Lynch said. "We have the market expecting 17 percent, so it better be 20 percent for the market to be really impressed."

Strong sales and favorable exchange rates spurred a 20 percent hike in profits at Johnson & Johnson, which beat estimates by 3 cents per share and gained 54 cents to $51.74. Merrill Lynch, meanwhile, slipped 83 cents to $58.90 after posting record first-quarter earnings of $1.22 per share, beating analysts expectations by 15 cents per share.

Falling mortgage bank income hurt BB&T Corp.'s earnings, which missed estimates by 3 cents per share. BB&T climbed 36 cents to $35.26.

Media company Dow Jones & Co. fell 49 cents to $48.46 after reporting a 73 percent drop in first-quarter earnings due to a one-time gain a year ago. The publisher of The Wall Street Journal beat analysts' expectations by 2 cents per share, however.

Intel Corp. was down 3 cents at $27.57 in advance of its earnings report, due after the close of trading Tuesday.

Declining issues outnumbered advancers by a 3-to-1 ratio on the New York Stock Exchange, were volume came to 404.21 million shares, compared with 325.78 million at the same point Monday.

The Russell 2000 index of smaller companies fell 6.70, or 1.1 percent, at 592.95.

Overseas, Japan's Nikkei stock average gained 0.4 percent. In afternoon trading, Britain's FTSE 100 was up 0.8 percent, Germany's DAX index surged 1.4 percent, and France's CAC-40 rose 0.8 percent.

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New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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