Nasdaq tumbles, but Dow adds 11 Computer stocks weaken on concern about earnings

June 21, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- U.S. stocks were mixed yesterday as computer stocks retreated on concern that second-quarter earnings will fall short of expectations. Gains in Coca-Cola Co. and drug companies tempered the decline.

Analysts pared earnings estimates for Hewlett-Packard Co. and International Business Machines Corp. amid signs that European sales are slumping and demand for home computers has slackened.

The Nasdaq composite index slid 11.93 to 1,167.34 after having been down 26.48 points earlier. The index, which is filled with computer, software and semiconductor issues, has lost 5.51 percent since June 12, its biggest six-day decline since early January.

The Dow Jones industrial average rose 11.08 to 5,659.43. Boeing Co. was among the gainers, climbing $2.625 to $87.375. IBM's shares slid $1.375 to $100.75 after Dean Witter Reynolds Inc. cut its estimate for 1996 profits by a quarter to $11 a share.

Among broad market indexes, the Russell 2,000 index of small capitalization stocks fell 3.04 to 344.16; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 16.97 to 6,538.64; the American Stock Exchange market value index fell 3.69 to 585.24; and the S&P 400 midcap index slid 1.59 to 234.97.

Some 1,460 shares fell and 876 rose on the New York Stock Exchange, where 441 million shares changed hands. The three-month daily average volume is 401 million shares.

Stocks retreated from early highs after the Philadelphia Federal Reserve Bank reported that manufacturers in that region are seeing improved demand for their goods. That sent bond yields higher amid concern that inflation may accelerate.

The spike in bond yields hurt financial shares. The yield on the benchmark 30-year Treasury bond climbed to 7.14 percent from 7.10 percent before falling back. Shares of banks and other lenders, companies whose profits rise and fall the most when rates move back and forth, slumped as a result.

Hindered by losses in financial issues, the Standard & Poor's 500 index rose 0.14 to 662.1. Citicorp slid $1.125 to $81.125; Chase Manhattan Corp. dropped $1.50 to $69.50; NationsBank Corp. slipped $1.50 to $69.50; and Federal Home Loan Mortgage Corp. slumped $2.25 to $82.50.

Still, the drop in computer shares took center stage. The Morgan Stanley high tech index declined 6.58, or 2.1 percent, to 314.09 before bouncing back to 324.16, up 1.09 percent. Synopsys Inc., which sells software for computer chip designers, led the rebound.

Hewlett-Packard dropped $1.625 to $95.25; Dell Computer Corp. fell $2.50 to $51.625; and Gateway 2000 Inc. slid $2.25 to $32.375.

Cisco Systems Inc. dropped $1 to $52.375, and Intel slipped 25 cents to $71.125.

Coke's shares gained after the company said case sales for the latest three months jumped 8 percent to 9 percent because of strong U.S. and European sales, analysts said. The beverage company's stock rose to $47.50 before closing at $46.75, up 25 cents

Gains in drug shares were spurred by Eli Lilly & Co., which rose $1.625 to $64.25. Earlier this week, the company's Humalog drug, which it says could dramatically simplify the lives of millions of American diabetics, became the first new insulin product approved in the U.S. in 14 years.

Investors punished shares of companies that posted disappointing profits.

Alco Standard Corp.'s stock tumbled $9.625 to $49 after the office supply company said it expects fiscal third-quarter earnings to fall below estimates, partly from costs to split into two publicly traded companies.

Read-Rite Corp. fell 81.25 cents to $14.375 after it said it expects sales for the fiscal third quarter to fall from the second quarter because of reduced and postponed orders for its disk-drive products.

Pub Date: 6/21/96

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