Stocks fall for third session in a row Computers weak as Dow industrials drop 28 points


NEW YORK -- U.S. stocks fell for a third day yesterday as investors grew concerned that the economy's expansion may be less vibrant than predicted. Computer shares again led the decline.

The Dow Jones industrial average fell 28.54 to 5,626.88 and has now dropped three straight days since closing at a record 5,683.60.

Shares of drug company Merck & Co. rose $2.50 to $65.50, the 30-stock average's biggest gainer, while International Business Machines Corp. led the decline, down $2.125 at $114.875.

The Standard & Poor's 500 index fell 0.79 to 649.19, following a drop of 1.71 points Wednesday. The Nasdaq composite index, including many computer-related issues, dropped 2.03 to 1,099.79, its third consecutive decline.

Some 1,134 shares dropped and 1,237 rose on the New York Stock Exchange, where about 365.2 million shares changed hands. The three-month daily average volume is 419 million shares.

Yesterday's volume on the Big Board was its lowest since Jan. 29's 362.9 million shares.

Analysts said the low trading totals may be attributable to differing opinions about the economy, and, by default, the stock market.

"People are just waiting to see if there's a definite direction the market's going to take," said Greg Schoenleber, an analyst at Birinyi Associates Inc. in Greenwich, Conn.

A report from the Federal Reserve Bank of Philadelphia showing sluggish regional manufacturing last month made investors less confident that better days are ahead for the economy.

It derailed two weeks of optimism that a rebound in economic growth would spur corporate profits higher.

"During the last couple of trading sessions, the pendulum has swung back," said John Kim, chief investment officer of Aetna Retirement Services Inc., which oversees $34 billion in assets. "The manufacturing sector is weak."

The Fed manufacturing report sent investors back into industries that do well even when the economy isn't growing fast.

Gains in steady-earning drug stocks sent the Amex pharmaceutical index up 8.52, or 2.8 percent, to 307.7, its biggest gain since May 2, 1994.

"They're a safe place to hide," said Rob Brown, chief market strategist at Ferris, Baker Watts Inc. in Baltimore.

Leading the gains, Eli Lilly & Co. climbed $4.625 to $66.625; Pfizer Inc. added $3.50 to $66.875; and American Home Products Corp. jumped $2.625 to $102.25.

"Some of the drug companies are going to post double-digit earnings growth," said Arno Rayner, president of Rayner Associations in Mill Valley, Calif., which oversees about $200 million in assets.

The firm's top pick in the group right now is Pfizer, followed by Merck & Co. and Schering-Plough.

Computer and semiconductor shares fell for a second day after one of the nation's biggest computer companies, Digital Equipment Corp., warned that earnings in the quarter ended March 31 wouldn't match expectations. Digital cited sluggish demand for PCs for the shortfall.

Digital Equipment dropped $2.75 to $53.25, bringing its two-day slide to 21 percent.

"This DEC wreck that just happened could almost be called a crash," Ferris Baker's Mr. Brown said.

Among broad market indexes, the Russell 2000 index of small capitalization stocks rose 0.53 to a record 328.87; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, fell 5.93 to 6,383.31; the Amex market value index rose 1.05 to 568.32; and the S&P 400 midcap index slid 0.29 to 229.99.

Yesterday's most active stocks in U.S. composite trading were Cisco Systems Inc., Glaxo Wellcome Plc's American depositary receipts, Altera Corp., Digital Equipment and Sun Microsystems Inc.

Pub Date: 3/22/96

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