Nasdaq tumbles blue chips also lose

Computer-related firms fuel the decline with warnings about profits

June 19, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks fell yesterday as a string of computer-related companies warned of slowing profit growth, fueling the largest drop in the Nasdaq composite index in more than three months.

Lattice Semiconductor Corp. and ADFlex Solutions Inc. joined a host of chip makers that recently announced weak sales in the current quarter.

Losses in Microsoft Corp., Intel Corp. and Cisco Systems Inc. helped sink the Nasdaq by 24.56, or 2.03 percent, to 1,183.08, its biggest decline since March 8, when a surge in job growth dashed expectations for lower interest rates.

The Dow Jones industrial average fell 24.75 to 5,628.03, its sixth drop in seven days. The broader Standard & Poor's 500 index fell 3.10 to 662.06, its eighth straight retreat.

Lattice said sales for the current quarter will decline by 8 percent to 10 percent from last quarter because of falling prices for commodity chips and some customers' excess inventory. Its shares fell $8.875 to $25.375. Earnings for the current quarter will be disappointing, the company said.

ADFlex Solutions Inc., another chip maker, fell $3.50 to $9 after it said second-quarter sales would drop 10 percent below the first quarter's.

The Russell 2,000 index of smaller shares fell 4.86 to 349.07, also its largest drop since March 8; the Wilshire 5,000 index skidded 47.57 to 6,568.85; the S&P midcap index slid 1.18 to 236.69; and the American Stock Exchange market value index dropped 1.54 to 588.99.

Declining issues outnumbered advancers by 1,254 to 1,108 on the New York Stock Exchange.

Other chip makers fell as well. Intel, the largest U.S. manufacturer of semiconductors, tumbled $1.625 to $70.375; Motorola Inc. fell $1.875 to $62.375; and Micron Technology Inc. fell $2.125 to $27.375.

Companies that make equipment for retrieving computerized data slumped.

Meridian Data Inc. shares fell $5.375 to $8.625 after the company said second-quarter earnings may not meet Wall Street expectations as its focus shifts to software from hardware. Meridian makes products that retrieve data from CD-ROM disks in much the way a jukebox plays music from records.

Iomega Corp., a maker of computer disk storage systems and one of this year's highest-flying stocks, plunged $10.25 to $26.75.

Several chip makers and support companies warned of disappointing earnings during the past couple of weeks, including Cyrix Corp., Altera Corp. and Lam Research Corp. The Philadelphia semiconductor index is down 13 percent this month.

Shares of In Focus Systems Inc., a computer projection screen maker, fell $4.125 to $29.75 after the company said second-quarter earnings and gross margin would come in lower than analysts' estimates.

Radius Inc., a computer-graphics company, said it would return to profitability in the current quarter, after losing money on operations for a year. Its stock still fell 78.125 cents to $2.96875. H. J. Heinz Co., a maker of ketchup and other foods, fell $1.375 to $31.125 as investors were disappointed by the company's earnings of 45 cents a share for the fiscal fourth quarter, 2 cents above the same quarter last year.

ValuJet Inc. shares plunged 3.50 to 6.50, their lowest level in more than a year, after regulators grounded the discount airline because of safety flaws.

Other airline shares jumped as investors saw ValuJet's potential demise as a boon for competitors' bottom lines. Southwest Airlines Inc. rose $1 to $28.625; AMR Corp., parent of American Airlines, gained $1.375 to $93.125; and UAL Corp., holding company for United Airlines, rose $1.375 to $55.75.

Sun Microsystems Inc. rose $1.125 to $57 after Goldman, Sachs & Co. bumped the stock up to its "priority list" from its "recommended list."

Philip Morris Cos. led decliners in the Dow industrials, retreating $1.875 to $102.50. A member of the legal team for the biggest anti-tobacco class action ever brought said it would appeal the case's recent dismissal to the Supreme Court.

Interest rates climbed for the first time in four days. The yield on the 30-year Treasury bond rose 4 basis points to 7.10 percent. The prospect of higher corporate borrowing costs has kept a lid on stocks this month as the benchmark 30-year yield rose above 7 percent.

Economically sensitive shares, such as heavy equipment makers Ingersoll-Rand Co., up 75 cents to $43.50, and Caterpillar Inc., up 25 cents to $65.625, gained on a perception that the economy is picking up steam. That view gained support from the Bank of Tokyo-Mitsubishi/Schroder Wertheim report that U.S. retail sales in the second week of June rose 4.4 percent from a year ago.

Norfolk Southern Corp., a railroad, added $1 to $85.125 and Conrail Inc. rose $1 to $68.75. Railroad earnings benefit from an economic pickup because of increased shipments and lower per-unit costs.

ITT Corp., which runs Sheraton hotels and other gaming and entertainment venues, rose $2.125 to $63.625. Hilton Hotels Corp. climbed $1.50 to $119.875.

Pub Date: 6/19/96

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