Computer stocks lead market downward 3Com's warning of lower-than-expected earnings spurs slide

February 11, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday after computer networking company 3Com Corp. warned of disappointing revenue and earnings, triggering a slide in International Business Machines Corp., Intel Corp. and other computer shares.

Analysts warned last week that industry bellwether Intel may not duplicate its 1996 growth rate. Semiconductor and software stocks led the market to records last year, doubling the return of the average Standard & Poor's 500 stock.

The Dow Jones industrial average fell 49.26 to 6,806.54, after rallying 82.74 on Friday. The drop was led by IBM, down $6 to $142.75.

The Nasdaq composite index, whose three biggest stocks are Microsoft Corp., Intel and Cisco Systems Inc., slid 22.37 to 1335.34, and is now about 53 points shy of its Jan. 22 record. The S&P 500 index fell 4.13 to 785.43.

The Russell 2,000 index, considered by investors to be the best measure of small stock performance, fell 2.60 to 364.15; the Wilshire 5,000 index of stocks listed on the New York Stock, American and Nasdaq markets, dropped 40.17 to 7,542.75; the American Stock Exchange composite index climbed 1.23 to 587.84; and the S&P midcap index lost 1.70 to 262.32.

3Com fell $13.50, or 27 percent, to $37.25, after it warned that third-quarter revenue and earnings may be below analysts' expectations. Two months ago, the stock traded at $81.375.

Cisco Systems, which leads the market for computer networking equipment, accounting for 80 percent of all network routers, fell $5.125 to $58.

Intel fell $4.75 to $151.625 and Compaq Computer Corp. fell $5.25 to $77.375.

Telecommunications shares advanced as computer technology investors looked for a less risky place to invest.

zTC AT&T Corp. rose 75 cents to $39; MCI Communications Corp. rose 31.25 cents to $36.6875; Sprint Corp. rose 62.5 cents to $43; SBC Communications Inc. rose $1.25 to $55.125; and Bell Atlantic Corp. rose $1.625 to $69.75, making the S&P Telephone Index the leader among advancing S&P 500 group indexes.

Oil company stocks fell as fuel prices dropped to five-month lows on expectations that mild weather in the United States and Europe will mean plentiful supplies.

Mobil Corp. lost $2.875 to $126.375 and Royal Dutch Petroleum Co. fell $2 to $175.75. DuPont Co. sank $4.375 to $108 after Donaldson, Lufkin & Jenrette Inc. cut its investment opinion on the oil and chemical producer.

Philip Morris Cos. led tobacco companies lower after a federal judge said the first phase of sweeping cigarette regulations by the U.S. Food and Drug Administration won't be blocked before taking effect. Philip Morris dropped 87.5 cents to $120.25; UST Inc. dropped 25 cents to $30.50;and RJR Nabisco Holdings Corp. fell 25 cents to $34.

Losses were tempered by Sears, Roebuck & Co., which rose $1.50 to $53, after Merrill Lynch & Co. said any weakness in the stock is a buying opportunity, citing strength in the retailer's profit margins. Sears is the second-best performing stock in the Dow this year.

The Dow average is little changed in February, after gaining 5.6 percent in January.

Some 472 million shares changed hands on the New York Stock Exchange yesterday, with decliners outpacing advancers 1,327 to 1,160.

ITT Hartford Group Inc. shares rose $3.125 to an all-time high of $78.375 after the company said it would sell shares representing as much as 20 percent of the ownership of its Hartford Life Inc. unit as soon as April.

PaineWebber Group Inc. shares rose 37.5 cents to $36.25 after the Wall Street Journal reported in its "Heard on the Street" column that the company is the brokerage most likely to be involved in a merger. Cowen & Co. analyst Jeffrey Sprague said General Electric Co., which owns a 24 percent stake in the firm, might see a "window of opportunity" right now to capitalize on its holdings.

He said he thinks there are talks going on right now.

Mellon Bank Corp. shares rose $1 to $77.875 after UBS Asset Management analyst Nancy Tengler told Forbes magazine the bank's shares could rise to 102 in the next year from about 76. Mellon's shares currently trade at 13 times earnings. Tengler said the stock is expected to increase to trade at a standard price-to- earnings ratio of 17 for asset management companies.

Pub Date: 2/11/97

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