Computer earnings forecasts hurt stocks But shares of Sears, consumer product makers attract more investors

Wall Street

March 10, 1998|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday as investors sold shares of computer companies that warned of disappointing earnings and bought shares of Sears, Roebuck & Co. and consumer products makers regarded as more consistently profitable.

The Nasdaq Composite Index, packed with computer shares, fell 28.33, or 1.6 percent, to 1,725.16 after Compaq Computer Corp. joined Intel Corp. and Motorola Inc. in warning that it would fall short of earnings forecasts.

The Dow Jones industrial average fell 2.25 to 8,567.14. The Standard & Poor's 500 Index dropped 3.38, or 0.3 percent, to 1,052.31.

Beverage, drug, retail, household product and cosmetics companies gained. Investors bought shares expected to benefit as unemployment hovers at a 24-year low and low interest rates let people buy goods on cheaper credit, refinance their homes and spend the extra money at the shopping mall. Sears' stock jumped $3.125 to $57.8125.

Takeovers boosted the shares of LCI International Inc., Alumax Inc. and Avenor Inc. Northrop Grumman Corp. plunged on concern that antitrust authorities may sue to block its purchase by Lockheed Martin Corp.

The Dow Jones Utilities Index set its first record of the year, rising 1.20 to 274.10.

Records in the Dow utilities are seen as signs that investors expect lower interest rates. The stocks rise when investors think the high dividends of utility stocks will give a better return than Treasury bonds.

The average dividend of the 26 electric companies in the Standard & Poor's Utilities Index is 5.1 percent. The yield on the 30-year Treasury bond fell below 6 percent for the first time this month.

About 624 million shares changed hands on the New York Stock Exchange, above the three-month daily average of 599 million.

Computer-related shares dropped after Compaq said late Friday that it will break even in the first quarter, hurt by excess inventory and price cuts on personal computers.

Compaq fell $2.1875, or 7.9 percent, to $25.875. Dell Computer Corp. fell $6.125 to $63.125.

The Standard & Poor's Computer Systems Index fell 4.24 percent, its second worst drop since its 9.0 percent plunge on Oct. 27.

Decliners outnumbered advancing stocks on the New York Stock Exchange by 1,574 to 1,379.

Oil-related shares continued to suffer as crude for March delivery tumbled 58 cents to $14.33 a barrel on the New York Mercantile Exchange, the lowest since March 29, 1994. The S&P Oil Well Equipment & Services Index of six companies fell 3.8 percent, led by Schlumberger Ltd., which fell $2.8125 to $71.0625.

Oil companies also fell. Chevron Corp. led the Dow average down, falling $2.50, or almost 3 percent, to $81.9375. Texaco Inc. also dropped 3 percent, while Royal Dutch Petroleum Co. lost 2 percent.

Crude prices fell after Saudi Arabia, the world's largest oil exporter, refused to cut output to boost prices because other producers refused to follow suit.

Merger news, which brings the promise of cost-saving consolidation and high prices paid to stock owners of takeover targets, drove several stocks up.

LCI International rose $3.9375 to $37.6875 on the NYSE after Qwest Communications International Inc. agreed to buy the company for $4.4 billion in stock, making it the fourth largest U.S. long-distance phone company. Alumax soared $10.9375 to $47 after it agreed to be acquired by Aluminum Co. of America for $3.8 billion in cash, stock and assumed debt. Alcoa will pay $50 a share for half of Alumax's shares outstanding, a 36 percent premium to Alumax's Friday closing price. Alcoa fell 18.75 cents to $71.4375.

Avenor rose $2 to $23.9375 after newsprint maker Bowater Inc. said it would buy the Canadian forest products company for $24.67 a share, or $1.8 billion in cash, stock and assumed debt, topping a $19.75-a-share hostile bid from Abitibi-Consolidated Inc. Bowater fell 87.5 cents to $49.8125. Abitibi said it won't increase its offer; its shares rose 81.25 cents to $15.375.

The Russell 2,000 index of small capitalization stocks fell 2.60 to 461.12; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, dropped 33.54 to 10032.41; the American Stock Exchange composite index fell 3.60 to 709.31; and the S&P midcap index lost 1.70 to 353.65.

Maryland stocks rose, led by Igen International Inc. -- up $4.50 to $31.50 -- and Orion Network Systems Inc. -- which closed up $1.875 to $20.25.

Pub Date: 3/10/98

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