Dow drops 7.14 as semiconductors pace decline

April 13, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks fell yesterday amid lower-than-expected earnings from Motorola Inc. and a survey showing sales of semiconductors slowed in March.

"Semiconductor stocks are getting killed," said William Lord, vice president in equity trading at UBS Securities Inc. "That's the feature of the day."

Stock prices got an initial lift from yesterday morning's report that producer prices rose 0.2 percent in March, in line with economists' ex

pectations. Although the figure suggested that inflation is under control, the gain in stocks didn't last.

"When people are nervous about inflation, good news is no news and bad news is terrible," said Robert Giordano, director of economic research at Goldman Sachs.

The Dow Jones industrial average fell 7.14, to 3,681.69, giving up half Monday's 14.57-point gain. The Standard & Poor's 500 index slumped 2.26, to 447.61, led by the semiconductor group, which tumbled 16.53, to 192.10, amid losses in Motorola, Intel Corp. and Texas Instruments Inc.

The Nasdaq composite index fell the most of the three major market gauges, reflecting the preponderance of computer, semiconductor and software stocks in that index. The index slid 8.89, to 739.22, led by Intel, Cisco Systems Inc., Applied Materials Inc. and Microsoft Corp.

Eleven stocks dropped for every seven that rose on the New York Stock Exchange. Trading was moderate, with about 258 million shares changing hands on the Big Board.

Motorola, the most actively traded U.S. stock yesterday, plummeted $4.75, to $95.25, extending an overnight drop of $6. The cellular phone maker and semiconductor maker posted a 46 percent increase in first-quarter earnings.

"Motorola is a typical case of overreaction," said Peter DaPuzzo, senior managing director at Cantor, Fitzgerald & Co. "We're in a market where the tendency is for people to slide closer to the exits until they get more confidence back."

Motorola earned $1.03 per fully diluted share in the first quarter, up from 72 cents a year ago but below the mean analyst estimate of $1.05 a share, according to Institutional Brokers Estimate System.

Semiconductor stocks fell after the industry's trade group said chip makers received $113 worth of new orders in March for every $100 worth of product shipped. Analysts had expected new orders to be worth $116 to $120.

Intel sank $3.4375, to $65.75; Texas Instruments dropped $5.625, to $73; Micron Technology Inc. slid $5, to $86.375; and National Semiconductor Corp. declined $1.375, to $19.25. Applied Materials, a maker of semiconductor wafer-fabrication equipment, closed down $4.25, at $43.25.

Computer networking hub makers weakened after SynOptics Communications Inc. posted lower-than-expected first-quarter earnings. SynOptics shed $2, to $20, and Cisco Systems dropped $2.375, to $31.

Microsoft shares closed $2.25 lower, at $84.75, after a report in the Wall Street Journal that the software company is scaling back its partnership with Sybase Inc., traders said.

Yesterday, the Labor Department said wholesale prices rose 0.2 percent last month, compared with expectations of a 0.1 percent gain. The core rate, excluding food and energy prices, also rose 0.2%, matching economists' forecasts.

Treasury bonds shed some of their gains after the PPI announcement, then rebounded after the Fed bought notes and bonds to make more money available to banks. The yield on the benchmark 30-year fell as low as 7.19 percent, from Monday's 7.24 percent, andclosed at 7.21 percent.

To be sure, investors still await today's release of consumer prices and retail sales for confirmation of the inflation outlook, traders said.

Investors will scan the economic reports for March for clues whether the Federal Reserve will raise the interest rate on overnight loans between banks for a third time this year to stave off inflation, traders said. The Fed's policy-making panel, the Federal Open Market Committee, next meets on May 17.

Bond yields have risen more than 111 basis points since the Fed raised interest rates on Feb. 4.

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