NEW YORK -- U.S. stocks fell yesterday as technology companies' shares slumped amid concern that rising inventories will hurt their profits and retailers' shares dropped on reports of .. uneven sales in August.
Technology shares tumbled because of investors' "worries that the personal computer industry is going to see a major slowdown," said Rick Martin, head of U.S. equity research at Swiss Bank Corp. in Chicago. "Right now, the data is ambiguous in terms of sales."
AST Research Inc. touched off a decline among high-tech companies when it said it will post a fiscal first-quarter loss because of product delays and lower prices. SoundView Financial Group Inc. added fuel by downgrading investment opinions on Microsoft Corp. and Compaq Computer Corp. out of concern for narrower gross profit margins, or earnings after product costs.
The Dow Jones industrial average closed down 11.98, at 3,901.44, after tumbling as much as 25.58. Aluminum Co. of America, International Paper Co. and Union Carbide Corp. paced the decline.
In the broader market, the Standard & Poor's 500 index dropped 2.33, to 473.17, as electric utility, semiconductor, software, computer and food issues fell.
Almost 13 stocks fell for every eight that rose on the New York Stock Exchange.
Optimism about technology companies' earnings began to crumble Wednesday amid concern that semiconductor companies had slowed shipments to Compaq, raising doubts about the $2 billion of inventory Compaq reported it held in July, Swiss Bank's Mr. Martin said.
Investors also are wary because technology stocks usually weaken this time of year. In the past 12 years, the companies' shares always "made a peak in late August through early October," Mr. Martin said, and "100 percent of the time, as a group, they were lower at Thanksgiving than at Labor Day. What typically happens is the third quarter results announced in October have more negative surprises than any other period of the year."
AST collapsed $5, to $13.0625; Compaq dropped $2.375, to $34.875; Microsoft declined $2, to $56.125; Intel Corp. lost $1.50, to $64.25; Advanced Micro Devices Corp. slid $1.50, to $27.50; Motorola Inc. fell $1.25, to $52.75; National Semiconductor Corp., downgraded by Smith Barney Inc., dropped $1.375, to $17.25; and LSI Logic Corp. declined $1.5156, to to $30.25.
Several retailers fell after reporting weaker-than-expected August sales or warnings about lower profits.
Gap Inc. fell $4.75, to $38.25. The chain said sales in stores open more than one year dropped 5 percent in August, prompting NatWest Securities Corp. to cut the stock to "hold" from "buy" and reduce earnings estimates.
Dayton-Hudson Corp. slid $3.50, to $81.25. Same-store sales at the Minneapolis department store chain rose a scant 1.4 percent.
Fingerhut Cos. plunged $5.5781, to $23.25. The direct mail retailer said it expects lower third-quarter earnings because of start-up costs associated with a television shopping service, as well as a financial unit.
CBS Inc. jumped $11.625, to $333, and General Electric Co. added 50 cents, to $50.25. The New York Times reported in yesterday's editions that Time Warner Inc. is studying the purchase of GE's NBC television network and that Walt Disney Co. approached CBS about buying the network.
Time Warner fell 12.5 cents, to $38, and Disney dropped 12.5 cents, to $41.125.
Brock Candy Co. vaulted $6.5625, to $19.375. The confectionery maker agreed to be bought by privately held E. J. Brach Corp. for $140 million, or $20 a share.
Trading was slowed by the approaching three-day holiday weekend and today's release of U.S. unemployment figures, traders said. Volume fell to 282.9 million shares from 365.6 million Wednesday.