Stocks tumble, Dow sheds 94 points Intel's announcement sends Nasdaq index skidding 2.72% lower

March 06, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks suffered their worst drop in eight weeks on concern that corporate profits will shrink, after Intel Corp. said its first-quarter earnings will fall short of expectations.

Investors said the warning from the world's largest maker of computer chips is a bad sign for U.S. corporate earnings, especially coming weeks before the end of the quarter.

The Dow Jones industrial average fell 94.91 to 8,444.33, led by Hewlett-Packard Co. and International Business Machines Corp. The Dow average had fallen 45.59 Wednesday after analysts cut earnings estimates for Walt Disney Co.

The Standard & Poor's 500 index fell 12.29 to 1,035.04. The Nasdaq composite index, laden with computer-related shares, tumbled 47.78, or 2.72 percent, to 1,711.92. Intel fell $10.875 to $75.5625, losing $17.9 billion in market value.

More than 92 million Intel shares changed hands, the third- highest volume ever for any Nasdaq stock above $1 after Oracle Corp. and Comparator Systems Corp. It broke the Intel volume record set in January 1996, which also followed a warning of a profit shortfall.

Among other broad market indexes yesterday, the Russell 2,000 index of small capitalization stocks lost 5.31 to 456.82; the Wilshire 5,000 index plunged 120.42 to 9,875.03; the American Stock Exchange composite index slid 4.84 to 704.34; and the S&P 400 mid-cap index dropped 3.87 to 350.01.

Stocks are still near record highs. Even with yesterday's losses, the Nasdaq is up 9 percent so far this year, the Dow is up 6.8 percent and the S&P 500 is up 6.7 percent.

Personal computer makers fell on concern that Intel's shortfall signals slowing demand. IBM lost $3.125 to $98.9375 on the New York Stock Exchange; Hewlett-Packard fell $2.375 to $61.9375; and Dell Computer Corp. fell $7 to $131.875.

Companies that sell computers also declined. CompUSA Inc. dropped $6.50 to $26.125 on concern that falling prices and demand will hurt earnings; Best Buy Co. fell $3.25 to $63.9375; and Tandy Corp., operator of Computer City stores, fell $1.25 to $43.50.

Retail stores were among the biggest advancers, after reports that February store sales met or exceeded expectations.

Wal-Mart Stores Inc. was one of only four gainers among the 30 Dow industrials, rising 43.75 cents to $48.875 after sales rose 9.8 percent in February, far more than analysts expected.

After the market closed, Wal-Mart said it would buy back up to $1.6 billion in stock.

Computer Sciences Corp. tumbled $11 to $94 after it rebuffed Computer Associates International Inc.'s $9.8 billion cash bid LTC and Computer Associates said it won't extend its offer. Computer Sciences, a California-based computer services provider, yesterday disclosed favorable profit forecasts that it said proved Computer Associates' $108-a-share offer was too low. Computer Associates rose $1.375 to $48.9375.

Boeing Co. fell $1.0625 to $52.25. UAL Corp.'s United Airlines said after the market closed Wednesday that it ordered 30 planes from Boeing's rival, Airbus Industries.

Waddell & Reed Financial Inc., a money-management company based in Overland Park, Kan., rose $3.4375 to $26.4375 in its first day of trading.

XLConnect Solutions Inc. fell $3.25 to $19.25 after Xerox Corp. said it would buy the companies as part of a plan to help customers link digital copiers to computer networks. XLConnect jumped 26 percent Tuesday when the talks were reported.

Pub Date: 3/06/98

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