Stocks end mixed over tobacco suit settlement Computer, software shares gain as Brooke reaches deal in cigarette suit

March 14, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK - U.S. stocks were mixed yesterday as Philip Morris Cos. tumbled on concern that tobacco companies will have to start paying damages to people who smoked their cigarettes. Computer and software issues gained.

The Dow Jones industrial average fell 15.17 to 5,568.72, with almost 13 points of the drop attributable to Philip Morris. The No. 1 U.S. tobacco company dropped $4.375 to $98 after a competitor said it is negotiating a settlement that would mark the first breach in the industry's defense against smokers' lawsuits.

Among broad market indexes, the Nasdaq composite index rallied 15.59 to 1,088.64 and the Standard & Poor's 500 index rose 1.46 to 638.55. Software and computer-related stocks led the gains, with Microsoft soaring $5.125 to $100.875.

The Russell 2,000 index of small capitalization stocks rose 2.44 to 323.46; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock markets, jumped 20.41 to 6,278.59; the American Stock Exchange market value index rose 1.6 to 560.77, and the S&P 400 Midcap index gained 2.35 to 227.37.

About 1,536 stocks rose and 884 fell on the New York Stock Exchange, where 413.03 million shares changed hands. The three-month daily average on the Big Board is 423.1 million shares.

Yesterday's most active stocks in U.S. composite trading were Microsoft, Kmart Corp., Intel, America Online Inc. and Cisco Systems Inc.

Merrill Lynch & Co., the nation's biggest securities firm, told investors to buy Microsoft's shares, citing expectations for strong earnings growth this year and next.

Dozens of computer-related issues have languished since September as investors doubted profits could keep up their pace.

Technology stocks gained after a key gauge of demand for computer chips the Semiconductor Industry Association's book-to-bill ratio showed signs of bottoming in February. A stronger-than-expected employment report Friday further instilled confidence that the economy isn't wilting.

The advance in stocks was choked off by a drop in tobacco shares after Brooke Group Ltd.'s Liggett Group unit said it agreed to settle a class-action lawsuit and is close to signing an agreement with the five states that have filed smoking-related suits.

The S&P tobacco index plunged 68.22 to 1,694.24 after reaching an all-time high of 1,796.9 last Thursday. UST Inc. fell 50 cents to $34.625; B.A.T Industries PLC's American depositary receipts dropped 87.5 cents to $15.75; RJR Nabisco Holdings Corp. lost $1 to $33.875; and American Brands Inc. slid $1 to $43.75.

Brooke Group's stock rose $1.50 to $9.875. Some market watchers said that investors eventually will come around, and that the stocks already reflect the risks of lawsuits.

Oil drilling and equipment companies jumped after a report showing smaller-than-expected gasoline U.S. stockpiles boosted gasoline prices to a nine-month high. Schlumberger Ltd. rose $3.50 to $78; Halliburton Co. gained $3 to $56.25; and Baker Hughes Inc. strengthened $1.625 to $27.875.

Occidental Petroleum Corp. rose $1.375 to $25.375; Phillips Petroleum Co. jumped $1.125 to $38.625; and Ashland Inc. added $1.25 to reach $38.

Microsoft's stock gained after Merrill Lynch's Lucianne Painter raised her opinion on the software company's shares to intermediate-term "buy" from "accumulate." She raised her earnings estimates for fiscal 1996 and 1997, as well.

The Morgan Stanley High Tech index of 35 companies rallied 6.79 to 320.33 as Hewlett-Packard rose $1 to $94.75; Intel Corp. climbed $1.25 to $56.125; and America Online Inc. spurted $2 to $57.50.

Oracle Corp. jumped $1.375 to $49.625;, Computer Sciences Corp. gained $1 to $70.75; Sun Microsystems Inc. climbed $2 to $49; and Digital Equipment Corp. added $1.375 to reach $63.125.

Pub Date: 3/14/96

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