Stocks decline on light volume Nasdaq tumbles on high-tech worries

Big Board off 19 points

January 16, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks retreated yesterday as concern grew that earnings to be reported by Intel Corp. and Lattice Semiconductor Corp. this week will show waning demand for computer-related products.

The Nasdaq composite index, home to benchmark companies such as Microsoft Corp. and Intel, tumbled 19.66, to 988.57, its biggest drop since a 33.55-point slide Wednesday and lowest close since Aug. 3. The Dow Jones industrial average slid 17.34, to 5,043.78.

In the broad market, the Standard & Poor's 500 index fell 1.99, to 599.82. The Russell 2,000 index of small-company shares dropped 3.01, to 302.13; the Wilshire 5,000 index fell 29.08, to 5,869.43; and the AMEX market value index slid 1.94, to 532.70.

Trading volume was sluggish because of the Martin Luther King Jr. holiday. Volume on the New York Stock Exchange totaled 305.8 million shares.

Declining stocks outnumbered advancing issues by more than 13 to 10 on the NYSE.

So far this quarter, the number of companies in the S&P 500 Index that reported earnings beneath expectations, 38.3 percent, matched the number posting better-than-expected results. At the same point last quarter, 47.1 percent of companies beat expectations.

Semiconductor, software and computer companies slumped because of concern that their earnings may not be up to snuff.

The worst-hit of the computer-chip stocks was Lattice Semiconductor, down $5.25, at $27.75. The Millsboro, Ore.-based company is expected to release fiscal third-quarter earnings today before the stock market opens.

Intel Corp., scheduled to report earnings after the stock market closes today, tumbled $3.25, to $53.375 and was the most active stock, with 13.3 million shares traded. The semiconductor maker's fourth-quarter net income is expected to meet, but not exceed, earnings estimates of $1.10 a share.

Micron Technology Inc., the second most active stock with 10.8 million shares traded, fell $2.125, to $30.875.

Microsoft Corp., down $3.25 to $82.50, will report second-quarter earnings Thursday.

Among computer makers, International Business Machines Corp. dropped $3.25, to $83.125; Hewlett-Packard Co. dropped $2.625, to $75.75; Digital Equipment Corp. skidded $1.50, to $57.375; and Sun Microsystems Inc. fell $2.25, to $37.875.

Federal Express Corp., down $3.25, to $69.75, cited the impact of severe winter weather on its delivery service as it warned that fiscal third-quarter earnings will be significantly below analysts' estimates.

Other companies issuing profit warnings or unexpectedly weak earnings included Hutchinson Technology Inc., down $6, to $36.50. The maker of computer disc drives and other equipment earned $1.20 a share before one-time charges in its fiscal first quarter, up from 43 cents last year but beneath analysts' estimate of $1.31.

General Acceptance Corp., an issuer of auto loans to people with poor credit, plunged $5, to $7. William Blair & Co. slashed its 1996 earnings estimate to $1 a share from $1.40.

Failure Group Inc., an engineering consultant, also said fourth-quarter profits will fall below analysts' forecasts because of lower revenue and the absence of large projects. Failure shares dropped $1.25, to $5.125.

Drug stocks climbed amid expectations that their earnings will hardly be affected by slower economic growth this year. Merck & Co. surged $1.50, to $63.75; Pharmacia & Upjohn Inc. rose 50 cents, to $37.50; and American Home Products Corp. leaped $2.375, to $97.625.

Burlington Northern Santa Fe rose 75 cents, to $75. The railroad announced plans to cut 1,600 more jobs, sell 4,000 miles of branch lines and take a $585 million pretax charge in connection with its purchase last year of Santa Fe Pacific Corp.

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