Apple's shares dive, taking stocks lower Dow loses 22

WALL STREET

July 17, 1993|By Bloomberg Business News

NEW YORK -- Stocks declined yesterday as Apple Computer's shares tumbled 23 percent, fueling a slide in both the Nasdaq Combined Composite Index and the overall market.

"Apple was hammered, and that hurt the entire market," said Sid Dorr, head of institutional equities at Charles Schwab in San Francisco.

The Dow Jones industrial average fell 22.64 points, to 3,528.29, as Philip Morris Cos., International Business Machines Corp. and Procter & Gamble Co. accounted for much of the slide. The Dow was up 7.23 points for the week.

Among broader market averages, the Standard & Poor's 500 Index declined 3.47, to 445.75. The Nasdaq composite slumped 8.96, or 1.3 percent, to 699.73.

Apple plunged $8.25, to $27.50, closing above its 52-week low of $26, set earlier in the day. The tumble in Apple's stock occurred after the company reported a loss of $188.3 million, or $1.63 a share, for the third quarter, which ended June 25.

The results included an unexpectedly high after-tax charge of $198.9 million to cut 2,500 jobs and to cover other cost reductions.

Analysts said Apple's cost-cutting might be too little. "A 15 percent cost reduction might not be enough if sales do not take off," said Walter Winnitzki, an analyst at Dillon, Read & Co. Mr. Winnitzki was one of at least six Wall Street analysts who cut their investment ratings on the nation's second-largest personal computer manufacturer.

Apple's announcement followed the release of lower-than-expected results from Dell Computer Corp. and Weyerhaeuser Co. and a restructuring announcement from Procter & Gamble. In addition, Liz Claiborne's stock fell $6.625, to $23, after the company said 1993 earnings would be 30 percent below last year's results.

"People haven't really focused on earnings so far, but as they do, I think you'll see the market back off," said John Brooks, director of sales and marketing at the Notley Group.

The financial markets were met with more disappointing economic reports. The Federal Reserve Board said industrial production fell 0.2 percent in June, the first decline in nine months. Separately, the University of Michigan said its index showed that consumer confidence fell in June, and preliminary figures indicate that confidence was also down this month.

Long-term interest rates fell after the release of the report on industrial production. The yield on the 30-year Treasury bond fell to a record low of 6.52 percent, before closing at 6.54 percent.

"There's no doubt the low interest rates will continue to buoy this market, but I contend that this 36-month-old bull market is running out of gas," said William Raftery, market analyst at Smith Barney, Harris Upham & Co.

Every day, fewer stocks are hitting 52-week highs, even as leading stock indexes hover at record levels, Mr. Raftery said. "That's historically been a sure sign that the market is close to hitting a peak," he said.

Declining stocks led advancing issues by about 9-to-7 yesterday on the New York Stock Exchange. Trading was active, with about 263 million shares changing hands.

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