Dow gains 8.75, but technology issues are weak

January 26, 1995|By Bloomberg Business News

NEW YORK -- U.S. stocks closed mixed yesterday after Compaq Computer Corp. stunned investors by warning that first-quarter profit growth would slow.

The outlook from the world's largest personal computer maker pushed its stock down 11.8 percent and sent other technology shares into a tailspin. Compaq tumbled $5, to $37.375, as almost 20 million shares changed hands. It plunged as low as $34.50 during the day.

"Tech is dreck and no one wants to go near it," said Thomas Gallagher, managing director in equity trading at Oppenheimer & Co. "The stock market is worried about earnings."

The Dow Jones industrial average rose 8.75, to 3,871.45, as gains in J. P. Morgan & Co. and AT&T Corp. countered losses in International Business Machines Corp. and Boeing Co.

Among broader indexes, the Standard & Poor's 500 index added 1.58, to 467.44, and the Nasdaq composite index fell 2.22, to 760.98. Telephone, bank and electric utilities posted the biggest advances, while computer and semiconductor shares led the decliners.

Technology shares tumbled as Compaq's profit warning raised concern about a slowdown in the booming personal computer industry and in one of the stock market's hottest groups during the past few years. In addition, Compaq's fourth-quarter earnings fell below investor expectations.

Compaq's woes spread to its competitors and suppliers. Among computer makers, IBM fell $1.625, to $72.375; Dell Computer Corp. fell $1.875, to $42.75; AST Research Inc. eased 62.5 cents, to $15.75; Digital Equipment Corp. fell $1.625, to $32.125; Apple Computer Inc. fell 64 cents, to $40.98; and Gateway 2000 Inc. lost $1.625, to $23.125. Hewlett-Packard Co. fell $2.375, to $103; and Sun Microsystems Inc. fell $1.25, to $31.75.

Shares of software, semiconductor and chip-equipment makers also took a drubbing. Intel Corp. dropped 62.5 cents, to $70.875; Texas Instruments Inc. fell $1.75, to $70.625; Micron Technology Inc. dropped $1.75, to $45.75; and Applied Materials Inc. declined $2.375, to $40.50. Microsoft Corp. fell 26.56 cents, to $61.75.

Compaq wasn't the only technology company to release disappointing fourth-quarter earnings. Storage Technology Corp., a maker of data-storage systems, tumbled on lower-than-expected fourth-quarter earnings. The stock fell $3.625, to $22.375, extending Tuesday night's $4.50 drop in third-market trading.

Eleven stocks rose for every nine that fell on the New York Stock Exchange. Trading was active, with about 342 million shares changing hands on the Big Board.

The Russell 2000 index fell 0.14, to 248.80; the American Stock Exchange market value index rose 1.12, to 438.52; and the Wilshire 5000 index rose 8.99, to 4,611.43.

Compaq, whose stock soared 60.4 percent last year, said

fourth-quarter earnings reached 90 cents a share, below estimates of 94 cents, and said first-quarter earnings would be close to 80 cents a share. Its profit alert comes as many investors are worried about a slowdown in corporate earnings growth overall.

Earlier this week, production cuts by Ford Motor Co. and increased rebates at Chrysler Corp. demonstrated the toll that higher interest rates are taking on sales and profits, analysts said.

On Tuesday, the Federal Reserve's policy panel is scheduled to meet and possibly raise interest rates for the first time this year and the seventh time in the past year.

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