Stocks dip out of record territory Technology issues slump

interest outlook weakens financials

October 21, 1995|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks retreated yesterday amid a slump in technology and financial issues, just one day after setting records.

Personal computer stocks recoiled from warnings by Silicon Graphics Inc. about future growth, semiconductor issues were hurt by a slide in LSI Logic Corp. and financial shares tumbled after Federal Reserve Chairman Alan Greenspan suggested that interest rates might not be cut soon.

Mr. Greenspan said small wage increases that had helped curb inflation may give way to larger, more inflationary settlements.

"You're probably not going to get an easing" in rates, said Steve Mindnich, trader at Jefferies & Co. in Short Hills, N.J. "Look at the bonds. The Federal Reserve is preparing people."

The Dow Jones industrial average fell 7.59, to 4,794.86, as yields on benchmark 30-year Treasury bonds rose to 6.35 percent from 6.31 percent Thursday. For the week, the average gained 1.08 points. Thursday, the Dow closed at a record 4,802.45 International Business Machines Corp., American Express Co. and AT&T Corp. fell the most yesterday.

Bigger losses were felt elsewhere. The S&P 500 fell 3.19, to 587.46, after reaching records in each of the past three days. On the Nasdaq stock market, the composite index dropped 7.44, to 1,039.53.

"There's a little concern, or cautiousness, that the market only limped to a record yesterday on poor breadth," said Joseph DeMarco, head trader at HSBC Asset management, a unit of Hongkong & Shanghai Bank. "That's made some people a little less aggressive in bidding up stock," especially in the face of a drop in the Treasury market, he said.

The Russell 2000 index of small company stocks eased 0.6, to 302.82, and the Wilshire 5000 index slipped 31.19, to 5,808.47. The Dow Jones utility average surged 1.58, to 218.82, its highest since February 1994.

Some 13 stocks fell for every nine that rose on the New York Stock Exchange, where volume totaled 396.7 million shares compared with this year's average of 338.9 million.

Computer stocks slid after Silicon Graphics said fiscal first-quarter net income grew to 33 cents a share, higher than last year's earnings of 26 cents but lower than analysts' estimate of 34 cents.

Silicon Graphics also warned that slowing sales in the United States will lead to lower-than-expected growth in the fiscal year ending June 30, 1996. The company's stock fell $1.75, to $32.25.

Among other computer makers, Hewlett-Packard Co. dropped $4, to $88.75, IBM slipped $2.875, to $95.375, Digital Equipment Corp. dropped $3.125, to $51.75, and Sun Microsystems Inc. declined $1.75, to $70.25.

Semiconductor shares reacted to a 10 percent decline in LSI Logic. Investors grew concerned the Milpitas, Calif.-based computer chip company's growth is slowing, even after it posted unexpectedly strong third-quarter profits.

LSI said third-quarter profits surged to 50 cents a share from 36 cents in the year-earlier period. Analysts had forecast earnings of 46 cents.

The stock tumbled $5.50, to $49.50, after Soundview Financial Group lowered earnings estimates, citing chances for increased supplies and lower chip prices.

Texas Instruments Inc. dropped $3.50, to $69.75, Intel Corp. eased 87.5 cents, to $67.125, Applied Materials Inc. fell $2.125, to $47.625, and Micron Technology Inc. sank $3.875, to $69.

Financial stocks were crushed by higher interest rates after Mr. Greenspan's comments.

Merrill Lynch & Co. dropped $2.125, to $57.375, and Morgan Stanley Group Inc. slid $4.125, to $87.875.

Stocks tied to the housing market and credit-card industries also slid. Federal National Mortgage Association fell $3.50, to $103, Federal Home Loan Mortgage Corp. dropped $2.25, to $68.625, and MBNA Corp. lost $1.50, to $37.625.

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