Newspaper article St Louis Post-Dispatch (MO)

Stocks Retreat from Highs; Coke, ALCOA Fall

Newspaper article St Louis Post-Dispatch (MO)

Stocks Retreat from Highs; Coke, ALCOA Fall

Article excerpt

Stocks fell Thursday amid concern that share prices are higher than justified by prospects for corporate earnings. Aluminum Co. of America and Coca-Cola Co. led the decline.

Alcoa's drop of 1 1/8 to 62 3/8 spurred the Dow Jones industrial average lower.

The slump came as investors doubted that higher shares prices can be supported by the expectations for low-inflation growth that drove stocks to records 10 times this month. "With investors thinking this is as good as things get, you sell," said Rob Brown, chief market strategist at Ferris Baker Watts. "Stocks have risen to reflect 1997 earnings expectations and the low rates." In the two months ended Wednesday, the yield on the 30-year Treasury bond dropped 9.0 percent, and the Dow industrials gained 9.2 percent.6 The S&P 500 is trading at 20.59 times earnings, just short of its high for the year of 20.61 times earnings, set Wednesday. Generally, investors prefer price-to-earnings ratios more or less equal to the expected growth rate. …

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