Stocks' fall prolonged by concern over profits Dow index slips 18 points, Nasdaq loses 20 in slide by computer-related firms

March 20, 1997|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell again yesterday as shares of Intel Corp., Microsoft Corp. and other computer-related issues slumped on concern that 1997 profits won't match estimates. The Nasdaq composite index fell to a four-month low.

The drop in software, semiconductor and computer shares came after the heads of computer networking companies Cisco Systems Inc. and 3Com Corp. said business deteriorated in the first three months of the year. After reaching all-time highs in mid-January, many of the stocks have lost a quarter or more of their value.

"People are realizing that 30 percent growth rates in earnings for these companies can't go on forever," said John Niedenberger, a money manager at Advanced Investment Management, which oversees $3.5 billion. "People who got in and paid premium prices are stampeding to get out."

The Dow Jones industrial average fell 18.88 to 6,877.68. Leading the drop, Philip Morris Cos. fell $3.375 to $122; Procter & Gamble Co. slipped $2 to $122.25; and International Business Machines Corp. lost $1.50 to $137.875.

The Nasdaq composite index, filled with computer-related shares, tumbled 20.05, or 1.6 percent, to 1,249.29. It was the biggest slump since Feb. 27, when 3Com's $6.1 billion buyout of U.S. Robotics Corp. left investors unimpressed. The Nasdaq fell as much as 29.58 during the day.

The Standard & Poor's 500 index dropped 3.89 to 785.77, almost 4 percent below its all-time high of 816.29 on Feb. 18.

Among other broad U.S. stock indexes, the Russell 2,000 index of small capitalization stocks fell 3.14 to 351.79, a three-month low; the Wilshire 5,000 index, made up of stocks on the New York, American and Nasdaq stock exchanges, dropped 49.32 to 7,468.57; the American Stock Exchange composite index lost 3.66 to 591.79; and the S&P 400 midcap index slid 1.88 to 258.94.

Yesterday's most active stocks were Cisco Systems, Ascend Communications, Intel, Microsoft and Micron Technology Inc.

The yield on the benchmark 30-year Treasury bond rose 2 basis points to 6.98 percent, its highest since late September.

About 1,550 stocks fell and 926 rose on the New York Stock Exchange, the fourth time in the last five days that decliners swamped advancers by more than 500 shares. Roughly 536 million shares traded, above the three-month daily average of 491 million.

Shares of Cisco Systems fell $3.50 before recovering to $50, down 37.5 cents. President John Chambers said Internet service companies are cutting back on purchases of computer networking equipment.

3Com dropped $1.5625 to $32.1875 after Chairman and Chief Executive Eric Benhamou said the pace of revenue growth continued to slow in February after a disappointing January.

AMG Data Services, an Arcata, Calif., company that tracks mutual fund money flows, reported that about $94.5 million was pulled from technology funds in the five weeks that ended March 12.

Intel fell $3.375 to $133.375, and is down 17 percent from its all-time high of $162.25 on Jan. 31. Microsoft dropped $2.875 to $96.75; America Online Inc. fell $3.875 to $38.875; Ascend Communications Inc. dropped $2.375 to $45.75; U.S. Robotics fell $2.625 to $54.125; and Micron Technology Inc. fell $1.625 to $38.375.

One exception was Adobe Systems Inc., which rose $3.75 to $38.625 after the maker of graphics and design software reported better-than-expected fiscal first-quarter earnings of 63 cents a share.

Retailers, whose profits are likely to benefit as business and consumers spend more money, were among the day's biggest gainers. The S&P general retailers index rose 0.90 to an all-time high of 64.14.

Wal-Mart Stores Inc. climbed 75 cents to $29.875; Federated Department Stores Inc. rose $1.125 to $37.875; Dayton Hudson Corp. gained 62.5 cents to $43.875; and Toys "R" Us Inc. gained 25 cents to $28.25.

Pub Date: 3/20/97

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