Stocks decline on tech worries Dow slips 16.98 to below 4,800

volume rises

November 08, 1995|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks fell yesterday for a second day as concern grew that flagging demand for computer chips may signal the end of technology stocks' spectacular run.

Analysts lowered their investment opinions on semiconductor stocks after Cirrus Logic Inc. said its operating profit could drop by as much as 15 percent because of a canceled order from an unspecified customer, widely believed to be industry leader Intel Corp.

The Dow Jones industrial average fell 16.98, to 4,797.03, after setting a record high of 4,825.57 Friday. It was the average's first drop below 4,800 in three days.

International Business Machines Corp., Procter & Gamble Co. and Minnesota Mining & Manufacturing Co. led the 30-stock average's decline. Gains in General Motors Corp., Coca-Cola Co. and Merck & Co. helped the average recoup from the day's low of 4,788.72.

Six stocks fell for every five that rose on the New York Stock Exchange.

Some 364.7 million shares changed hands, compared with 309.12 million Monday.

Among broader market indexes, the Standard & Poor's 500-stock index dropped 2.14, to 586.32. Five of the index's 20 biggest stocks are technology issues -- IBM, Intel Corp., Microsoft Corp., Hewlett-Packard Co. and Motorola Inc. -- and all but Motorola fell more than a point. Gains in drug, beverage and electrical equipment shares partially offset the losses.

The technology stock-laden Nasdaq composite index slipped 18.24, to 1,043.90, its third straight loss. The index, which is up 39 percent this year, set a record high of 1,067.40 Sept. 13.

The Russell 2000 index of small companies slipped 1.49, to 301.45; the Wilshire 5000 dropped 30.05, to 5,800.11; and the American Stock Exchange market value index eked up 0.05, to 528.66.

Merrill Lynch & Co. analyst Thomas Kurlak cut his opinion to neutral on chip makers Intel, Cirrus, Texas Instruments Corp., Micron Technology Inc., LSI Logic Corp. and Avnet Inc. because of a decline in orders.

Intel slumped 6.3 percent, to $66.375, down $4.4375. Texas Instruments fell 2.6 percent, to $60.875, down $1.625.

Fremont, Calif.-based Cirrus Logic saw its shares plunge $12.75, or 31 percent, to $28, after it announced that fiscal third-quarter operating profits could slip because a "major customer" is reducing orders for graphics and audio chips. The announcement added to concern that the impressive gains made by shares of computer-related companies may be leveling off. Yesterday, Goldman, Sachs & Co. removed technology benchmark Microsoft Corp. from its list of top recommendations. Microsoft shares fell $4.375, to $93, yesterday.

Concern that computer chip companies will build enough capacity to eat away at profits prompted John D. Wylie, a money manager at Nicholas-Applegate Capital Management, to sell shares of National Semiconductor Corp., LSI Logic and VLSI Technology Inc. during the last six months. The firm, which invests $28 billion, has since shifted its money into Internet stocks such as Netscape Communications Corp. and America Online Inc.

The Philadelphia semiconductor index of 16 stocks, which soared 75 percent this year and was the second best-performing index after the American Stock Exchange airline index, weakened 14.02, or 5.5 percent, to 240.69.

Apple Computer Inc. was one of the few technology stocks that gained yesterday, its shares rising $1.50, to $39.625, amid speculation that Hewlett-Packard may be interested in acquiring the computer company. Hewlett-Packard fell $3.375, to $87.875.

A drag on the market was concern that a legislative logjam on how to balance the U.S. budget will make the Federal Reserve hesitant to cut interest rates again this year, analysts said.

Shares of companies that mine gold jumped as gold prices rose $2.90 to $386.60.

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