NEW YORK -- U.S. stocks were little changed yesterday on concern that this week's rally to records left some shares overvalued. High-flying stocks like Dell Computer Corp. slumped.
"Valuation levels are extremely high, with little margin for error," said Robert Rodriguez, who manages $1.7 billion in stocks for First Pacific Advisors Inc. in Los Angeles.
Drug stocks declined after Pfizer Inc. said its earnings in the second half of the year could grow less than 10 percent, below what analysts expected. Oil shares rose in the wake of this week's unexpectedly strong earnings.
The Dow Jones industrial average fell 3.49 to 8,113.44, ending a string of three record closes after zigzagging within a 76-point range. For the week, the Dow gained 2.8 percent.
Gateway 2000 Inc., a big direct-seller of personal computers, fell $2.6875 to $40.50 after reporting earnings fell short of analysts' expectations for the first time since April 1994. The company said demand for its personal computers was weak.
The news sent other PC makers' stocks lower.
Dell Computer ended a streak of eight record highs, falling $7 to $163. The stock was up 45 percent for this month through yesterday, when it closed at a record $170. Computer stocks have rallied on signs that demand will rise in the second half, boosting profits even as the industry cuts prices.
Compaq Computer Corp., the world's largest maker of PCs, slumped $5.25 to $135.625. International Business Machines Corp. fell 81.25 cents to $107.
Microsoft Corp. rose 50 cents to $138.50 after losing $3.4375 Thursday on a report that the company plans to raise spending on sales and marketing.
The American Stock Exchange's pharmaceutical index, which has risen 38 percent this year, far outpacing the broad market, fell $6.45 to $496.87 in the wake of the Pfizer news.
Pfizer fell $2.125 to $59.625. Merck & Co. dropped 75 cents to $103, and Eli Lilly & Co. lost $3.1875 to $112.9375. Bristol-Myers Squibb Co. dropped $1 to $81.875 after losing a patent infringement suit involving its second-biggest-selling drug, the anti-cancer treatment Taxol.
The Standard & Poor's 500 index fell 1.49 to 938.79, closing the week with a 2.6 percent gain. The Nasdaq composite index rose 0.45 to 1,569.58, pulled both ways throughout the day by Dell and Microsoft, and gained 1.4 percent for the week.
Among broad market indexes, the Russell 2,000 index of small capitalization stocks gained 0.35 to 408.54; the Wilshire 5,000 index of stocks on the New York, American and Nasdaq stock exchanges slumped 8.74 to 8,885.71; the American Stock Exchange composite index added 75 cents to 637.80; and the S&P 400 midcap index advanced 0.48 to 307.76.
Advancing and declining issues were almost evenly matched on the New York Stock Exchange as 1,399 shares rose and 1,394 fell. About 521 million shares changed hands, above the daily average of 510 million during the past three months.
The yield on the 30-year Treasury bond rose 2 basis points yesterday to 6.45.
Computer companies, which have been in the forefront of this month's rally, reported mixed earnings. Silicon Graphics Inc. beat expectations, while Gateway 2000 Inc. fell short.
Silicon Graphics rose $2.1875 to $25.4375 after the maker of workstations for computer graphics producers reported unexpectedly strong earnings. The company expects to stay profitable because demand is strong for its computers that manage data on PC networks and the Internet, its acting chief financial officer said.
Texaco Inc. rose $1.75 to $113.25 after raising its quarterly dividend 5.8 percent and saying it will split its common stock 2 for 1.
Mobil Corp. rose $1.25 to $75 and Chevron gained $1.125 to $78.
Galileo International Inc. rose $1.625 to $26.125 on its first day of trading, and was the second-most-active stock on U.S. exchanges. The operator of computerized travel reservation systems and some of the airlines that own stakes in it sold 32 million shares in a $784 million initial public offering.
Pub Date: 7/26/97