NEW YORK -- U.S. stocks fell yesterday for a second day, hammered by the biggest drop in computer shares since July. Concern that interest rates could rise and threaten corporate profits also dogged stocks.
Intel Corp. and Microsoft Corp. paced the markets' retreat. The decline came a day after Federal Reserve Chairman Alan Greenspan questioned the sustainability of a rally in which stock prices almost doubled since November 1994.
"Greenspan's fingerprints are all over this market," said James Weiss, deputy chief investment officer at State Street Research & Management Co. with $43 billion in assets.
The Dow Jones industrial average fell 58.11 to 6,925.07, extending Wednesday's 55-point drop. International Business Machines Corp. lost $3.875 to $143. McDonald's dropped $1.375 to $43.50 on reports it would announce its biggest discount program ever. Merck fell $3.50 to $93.875.
The Standard & Poor's 500 index fell 10.61 to 795.07. The Nasdaq composite index, filled with computer-related stocks including 3Com and Intel, fell 27.89 to 1,312.66.
3Com Corp.'s proposed $6.1 billion buyout of U.S. Robotics Corp. helped spark the decline in technology shares, because investors were unimpressed by the 12 percent premium 3Com was willing to pay. 3Com fell $4 to $35 and U.S. Robotics lost $1.875 to $59.125.
The Russell 2,000 index of small capitalization stocks fell 2.70 to 361.15; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, dropped 89.66 to 7,602.59; the American Stock Exchange composite index lost 2.14 to 595.17; and the S&P midcap index skidded 3.23 to 263.12.
The yield on the benchmark 30-year Treasury bond rose 3 basis points to 6.80 percent, up from 6.66 percent.
Philip Morris Cos., up $2 at $135.50, defied the Dow for a second day. On Wednesday, the company said it would split its shares 3-for-1 and buy back $8 billion in stock.
About 467 million shares changed hands on the New York Stock Exchange, where almost two stocks fell for every one that rose.
Intel led computer-related shares lower amid concern that higher rates might slow the economy, lowering future earnings expectations. The Morgan Stanley High Tech Index fell 16.48, or 4.2 percent to 373.29. The index is down 8.6 percent this month.
Intel fell $6.640625 to $139.734375; Cisco Systems Inc. fell $3.0625 to $55.0625; and Microsoft Corp. lost $4.125 to $96.125.
Shares of other computer networking companies fell as well. Cascade Communications Corp. lost $2.50 to $30.125 and Ascend Communications Inc. dropped $5.375 to $57.
Citrix Systems Inc. fell $15.625 to $10.625 amid concern that the software company's cross-licensing negotiations with Microsoft Corp. might not pan out.
Merck & Co. slid $3.50 to $93.875, sending drug makers lower amid concern that this year's rally has pushed prices to unsustainable levels. The American Stock Exchange Pharmaceutical Index is up 15 percent this year, more than 1.5 times the S&P 500's year-to-date advance.
Eli Lilly & Co. lost $2.125 to $89.625 and Pfizer Inc. lost $1.50 to 94.25.
Collective Bancorp Inc. options jumped amid speculation the New Jersey-thrift will be bought by Summit Bancorp. Collective Bancorp rose $3.875 before trading was halted pending news.
Minnesota Mining & Manufacturing Co. lost 87.5 cents to $92.125 after the diversified manufacturing company was cut to "hold" from "buy" at Salomon Brothers Inc.
Novell Inc. shares fell $2.25 to $10.625 after the computer networking company said its fiscal first-quarter net income fell to 15 cents a share from 17 cents a year earlier, short of the average estimate of 18 cents Wall Street was expecting.
Pub Date: 2/28/97