Stocks fall as Intel forecasts weakness Semiconductor, software shares lead decline

Dow sheds 38 points to 8,057

October 16, 1997|By BLOOMBERG NEWS

NEW YORK -- Stocks fell after Intel Corp. reported earnings below forecasts and warned of slowing growth, spurring concern that a pillar of the bull market is faltering.

Semiconductor and software shares paced the retreat. Intel, the world's largest chip maker, is a bellwether for the industry, and its dour forecast bodes poorly for companies that make computers and the software that runs them.

The Dow Jones industrial average fell 38.31 to 8,057.98, led by International Business Machines Corp., down $1.625 to $101.6875. The Standard & Poor's 500 index fell 4.56 to 965.72 and the Nasdaq composite index dropped 9.42 to 1,723.37.

GTE Corp. fell $2.1875 to $48 before trading was halted, after it offered to buy MCI Communications Corp. for $40 a share in cash, or $28 billion. British Telecommunications PLC and WorldCom Inc. already have made bids for MCI, which jumped $1.5625 to $36.875.

British Telecom rose $2.6875 to $75. WorldCom fell $1.3125 to $35.4375.

Among broad market indexes, the Russell 2,000 index of small capitalization stocks lost 2.01 to 462.74; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 37.75 to 9,365.46; the American Stock Exchange composite index slipped 0.45 to 714.34; and the S&P 400 midcap index slid 0.13 to 338.83.

Some 1,669 stocks fell and 1,205 rose on the New York Stock Exchange, where 506.8 million shares changed hands, below the recent daily average of 530 million.

Airline stocks jumped for a second day, helping limit the &L market's decline, amid expectations that profits will surge.

American Airlines' AMR Corp. jumped 93.75 cents to $119 after the company said third-quarter profit rose 15 percent, much better than expected, partly because of higher fares.

Delta Air Lines Inc. gained $2.3125 to $106.9375, after a $3.0625 gain triggered Tuesday by the company's forecast that earnings in the first quarter ended Sept. 30 will beat last year's $2.98 per diluted share.

United Airlines' UAL Corp. climbed $5.4375 to $99.8125; Continental Airlines Inc. rose $1 to $46.25; and US Airways Group Inc. jumped $1.625 to $49.4375.

Intel said after the close of trading Tuesday that its third-quarter profit rose 20 percent to $1.57 billion, or 88 cents a share, lagging behind the average analyst forecast by 2 cents. The company said a weak market for certain memory chips and higher sales of cheaper microprocessors ate into profits.

Intel's stock tumbled $5.125 to $86.6875, shaving about $8.4 billion from its value, as 66.3 million shares changed hands. More than 10 million changed hands in the first 12 minutes of trading alone. Intel's record volume for a full day is 68.3 million shares on Jan. 17, 1996 -- the second highest daily volume in Nasdaq history for a stock valued above $1. It also was spurred by weaker earnings.

Among other computer-related shares, Microsoft Corp. fell 93.75 cents to $135.75; Lattice Semiconductor Corp. fell $2.4375 to $59.9375; Lam Research Corp. fell $1.125 to $42.625; and Applied Materials Inc. slid $1.8125 to $49.0625.

Dell Computer Corp. bucked the trend, rising $3.875 to $102.875, as did Compaq Computer Corp., up $3.625 to $77.25.

John Rutledge, an analyst at Loomis, Sayles & Co., which owns Intel shares, said investors were "mystified" by Intel's forecast because shipments of PCs are expected to rise 18 percent in the fourth quarter.

A report showing an unexpected 0.3 percent increase in September retail sales drove up bond yields, contributing to the stock market's decline. The yield on the benchmark 30-year Treasury bond climbed to 6.39 percent from 6.35 percent.

Time Warner Inc. jumped $2.375 to $57.25 after the company said its third-quarter loss narrowed as its marriage of television channels like TBS and TNT with the cable systems that show them continues to pay dividends.

Pub Date: 10/16/97

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