Stocks dive again but then recover Technology, utility shares rebound

Dow ends day down 5.42

October 11, 1995|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks, down for a second day, recovered from an early plunge yesterday as many technology, utility and ++ paper companies rebounded.

Earlier, Motorola Inc., a bellwether maker of semiconductors and cellular telephones, unexpectedly reported weak earnings, renewing doubts about the strength of this quarter's corporate profits.

Motorola's announcement late Monday triggered a 65-point slide the Dow Jones industrial average and a 25.38-point drop in the Nasdaq composite index yesterday.

Technology stocks, which have slumped since Sept. 11 amid concern that earnings expectations won't be met, were sold indiscriminately, investors said.

The Dow recovered to 4,720.8, down 5.42, after falling to 4,660.47.

The early slide, on top of Monday's 42.99-point tumble, set off New York Stock Exchange limits on computer-guided trading for a second day.

It was also the biggest drop since July 19, when the Dow fell 139 points before recovering.

In the broad market, the Standard & Poor's 500 index slumped 6.82 before closing at 577.53, down 0.84. Loaded with technology companies, the Nasdaq composite rebounded to 983.47, down 1.27, after falling to 959.36.

The Wilshire 5000 index sank 16.88, to 5,679.73, and the Russell 2000 index of small-company shares fell 2.03, to 294.61, the third straight decline for both.

Declining stocks outpaced advancing issues by more than seven to four on the New York Stock Exchange, where trading surged to 413 million shares, up from Monday's slack 275.3 million.

Stocks were primed to fall when Motorola said third-quarter earnings rose 30 percent, to 81 cents a share, 2 cents beneath analysts' estimate. The Schaumberg, Ill.- based company said a slowing U.S. economy and declining prices for cellular phones ,, hampered sales growth.

Shares of Motorola, the 20th-largest stock in the S&P 500 index, dropped $7.75, to $61.25, before recovering to $64, down $5, on volume of 18.7 million shares, making it the day's most active stock.

Motorola is key to the rest of the stock market because it's one of the most widely held technology stocks among mutual funds, traders said.

Institutional investors own 62 percent of Motorola, but just 36 percent of AT&T Corp., 41 percent of Exxon Corp., 51 percent of General Electric Co. and 50 percent of International Business Machines Corp. Other makers of cellular phone equipment, such as Sweden's L.M. Ericsson Telephone Co. and Finland's Nokia Corp., suffered from Motorola's disappointing results. Ericsson American depositary receipts fell $1.125, to $19.875, and Nokia ADRs dropped $2.875, to $60.25.

A host of other technology stocks weakened for a third day. America Online Inc. fell $1.625, to $58.375; Adobe Systems Inc. declined $3.375, to $45.50; KLA Instruments Corp. dropped $1.25, to $37; 3Com Corp. fell $1.375, to $42.25; Computer Sciences Corp. fell $1.25, to $63.625; and International Business Machines Corp. dropped $1.25, to $90.75.

The 35-stock Morgan Stanley high tech index first fell 13.33, then rallied to 300.31, a 1.77-point gain.

Apple Computer Inc. eased 12.5 cents, to $34.6875. The Fidelity mutual fund group, the nation's largest with assets of some $500 billion, said it cut its holding in Apple to 2.51 percent at the end of September, from 10.97 percent at the end of June.

A report that new orders for computer chips slowed in September also put a damper on high-technology stocks, traders said. Meanwhile, two more high-tech producers said earnings this quarter didn't live up to expectations, bringing the total of such companies in the past month to about 95.

Shares in Sequent Computer Corp. shares slumped $2.625, to $15.75, and EMC Corp., a maker of computer storage and retrieval products, fell $2.875, to $13.875.

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