Stocks fall after Greenspan comment

Nasdaq drops 2.5%

Dow loses only 8 points as index is buoyed by AT&T

Wall Street

May 07, 1999|By BLOOMBERG NEWS

NEW YORK -- U.S. stocks fell yesterday, after Federal Reserve Chairman Alan Greenspan said equity prices are at levels many people see as "well beyond the justifiable."

Rising wage costs could force interest rates higher, threatening economic growth, Greenspan said at the Federal Reserve Bank of Chicago's annual banking conference.

"Interest rates are not likely to go down," said R. Lynn Yturri, manager of the $1.5 billion One Group Income Equity Fund. That means stock "prices will work their way down. The market is probably a little ahead of itself."

The Nasdaq composite index declined 62.16, or 2.5 percent, to 2,472.28, and the Standard & Poor's 500 index sank 15.26, or 1.1 percent, to 1,332.05, led by Intel Corp.

The Dow Jones industrial average closed 8.59 points lower at 10,946.82, after rebounding from a 103-point drop.

AT&T Corp. limited the Dow's losses, rising $5 to $61.9375 after Microsoft Corp. said it would invest $5 billion in the telephone company.

The 30-stock average also was helped by a late rally in commodities-related stocks such as Alcoa Inc.

AT&T was the most active stock in U.S. trading. Microsoft, the second-most active, fell $1.1875 to $77.9375. After the market closed, AT&T pared its gain, slipping from $61.9375 to $58.875 on one trade of 1,500 shares.

Semiconductor stocks fell on concern second-quarter earnings could be lower than forecasts because of falling prices. Intel, the world's largest computer chip maker, dropped $4.3125 to $59.6875.

Analyst Dan Niles at BancBoston Robertson Stephens Inc. told the firm's sales force that chip prices are a concern, though it is early in the quarter and demand for personal computers "seems solid."

Applied Materials Inc. lost $3.50 to $53.9375; Motorola Inc. fell $1.5625 to $79.2188; and Micron Technology Inc. slid $2.6875 to $38.4375.

Elsewhere on the broad market, the Russell 2,000 index, a benchmark of small-cap stocks, slid 0.89, to 433.38; the Wilshire 5,000 index dropped 121.25, to 12,199.83; and the S&P 400 midcap index skidded 5.84, to 394.99. The American Stock Exchange composite index advanced 2.32, to a record 787.81.

The Sun-Bloomberg Maryland index of the top 100 Maryland stocks slipped 0.08, to 189.03.

Advancing stocks almost equaled decliners at the end of the day on the New York Stock Exchange, after lagging for most of the session. About 879.1 million shares traded on the Big Board.

Regional telephone companies declined on concern that AT&T will be a tougher competitor now that it has agreed to buy MediaOne and ally with Microsoft. Bell Atlantic Corp. dropped $2.50 to $55.875.

SBC Communications Inc. and Ameritech Corp. slumped after the Federal Communications Commission staff said SBC's $84.2 billion purchase of Ameritech "flunks the public interest test." SBC fell $1.1875 to $53.50 and Ameritech dropped $1.25 to $66.0625.

Alcoa Inc., the world's biggest aluminum producer, rose $3.5625 to $63.75. Paper and building-products maker Georgia-Pacific Group rallied $3.8125 to $96.50.

Placer Dome Inc., the world's fifth-biggest gold producer, gained 81.25 cents to $15.625 as gold futures rallied.

America Online Inc., the biggest online service provider, lost $10.75 to $119. No. 1 online bookseller Inc. fell $9.125 to $137.375, and Internet stockbroker Ameritrade Holding Corp. tumbled $11.50 to $108.50.

Chevron Corp. dropped $2.25 to $97.8125; Exxon Corp. slid $2.3125 to $82.50; Schlumberger Ltd. fell $1.1875 to $63.1875; and Halliburton Co. declined $1.375 to $43.50.

Gap Inc. fell $5.125 to $64.25. The No. 2 U.S. specialty clothing retailer said April sales at stores open at least a year rose just 1 percent, compared with analysts' expectations for a gain of as much as 5 percent.

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