Technology shares lead pullback in nervous trading
Feb. 10, 1997
NEW YORK (AP) _ Technology shares continued to stumble Monday, pulling down the broad market, amid more profit-taking on January's gains and more disappointing earnings news from the computer networking sector.
The Dow Jones industrial average fell 49.26 to 6,806.54, having surrendered an early 20-point gain that briefly put the blue-chip barometer within 10 points of a record.
Broader measures also fell, with the steepest drop coming in the technology-laden Nasdaq market. Investors also moved to lock in some profits in other recent leaders, such as oil companies, which have retreated with crude prices.
``You're seeing a lot of stocks get beat up today, stocks that had been the winners of the last 12 months,'' said Don Hays, director of investment strategy at Wheat First Butcher Singer in Richmond, Va. A week ago, Hays cut his firm's recommended stock allocation in an investment portfolio to its lowest level since 1990. ``People are anxious to take some of that money they've made and put it on the sidelines.''
Before the start of Monday's trading, networking equipment maker 3Com warned that its earnings for the current quarter will be disappointing. 3Com shares tumbled 13 1/2 to 37 1/4 as the second most active Nasdaq issue after networking rival Cisco Systems, which plunged 5 1/8 to 58. Cascade Communications, another networking equipment maker that recently reported disappointing earnings, fell 1 13/16 to 35 in active Nasdaq trading.
Bellwether technology shares, meanwhile, pulled back again as investors moved to secure more profits from that sector's rapid advance.
IBM continued to stagger in the aftermath of its fourth-quarter earnings report, dropping the equivalent of about 18 Dow points after Cowen & Co. reportedly cut its earnings estimate for the computer giant. The stock fell 6 to 142 3/4 on Monday, and in less than three weeks since it set a nine-year high at 168, IBM has tumbled about 14.5 percent, or the equivalent of nearly 75 Dow points. Elsewhere on the NYSE, Compaq slid 5 1/4 to 77 3/8.
In Nasdaq trading meanwhile, Intel fell 4 5/8 to 151 3/4, Microsoft fell 2 5/8 to 97 3/4, Dell Computer fell 2 1/2 to 63 1/4, and U.S. Robotics fell 5 1/8 to 61 7/8.
Declining issues outnumbered advancers by an 8-to-7 margin on the New York Stock Exchange, where volume totaled 467.54 million shares as of 4 p.m., down from 538.62 million in the previous session.
The Standard & Poor's 500-stock list fell 4.13 to 785.43, and the NYSE composite index fell 1.45 to 412.35. Both measures, dominated by larger companies, had closed at record highs on Friday.
The Nasdaq composite index fell 22.37 to 1,335.34, but the American Stock Exchange composite index rose 1.23 to 587.84.
Hays attributed part of the day's weakness to worries about how the dollar's strength would affect earnings of big multinational firms such as IBM and DuPont, which plunged 4 3/8 to 108 as the Dow's other big decliner. A stronger dollar makes U.S. products more expensive in other markets and reduces the value of revenue earned in other countries' currencies.
The dollar _ which on Friday hit a 4-year high against the Japanese yen and a 2 1/2 year high against the German mark _ tumbled in early European trading after officials at a weekend meeting of the Group of Seven industrialized nations indicated the U.S. currency's recent surge has gone far enough.
Bonds slipped early in the session, but recovered as the dollar bounced back, with the yield on the 30-year Treasury bond _ a key determinant of corporate and consumer borrowing costs _ holding near late Friday's 6.69 percent. A weaker dollar would make U.S. securities such as bonds less attractive to foreign investors who convert their returns to other currencies.
Overseas, Tokyo's Nikkei stock average rose 1.8 percent, Frankfurt's DAX index rose 1.5 percent, and London's FT-SE 100 edged lower.