NEW YORK -- U.S. stocks posted their biggest loss in two months yesterday as concern spread that earnings will slow for technology companies such as Intel Corp. and Microsoft Corp., the market's leaders this year.
The Dow Jones industrial average dropped 57.41 points, or 1.23 percent, to 4,628.87, giving up only part of a 26.9 percent rally since November.
Rising interest rates and doubts about whether the Federal Reserve will cut rates again soon compounded the market's loss.
The Nasdaq composite index, loaded with the technology companies that rose the most this year, sank 35.66, or 3.6 percent, to 952.87 after falling as much as 51.22, the most points ever in one day.
Disappointing earnings at Intel, coming just one day after Microsoft issued a warning about future growth, triggered the market's plunge.
At one point, the Dow industrial average plummeted 133.84, its biggest slump since 190.58 points in October 1989.
The Standard & Poor's 500 index at its worst dropped 15.95 points before closing at 550.98, down 7.48, hurt by slides in computer software, semiconductor, computer hardware, communications and electrical equipment stocks.
More than seven stocks fell on the New York Stock Exchange for every one that rose. Some 483 million shares changed hands, the third most-active day in the exchange's history.
Nasdaq volume set a record, reaching 597.5 million shares.
The Wilshire 5000 index sagged 89.78, to 5,410.58; the Russell 2000 index of small-company stocks retreated 6.52, to 287.07.
The computer software, hardware and chip companies that led the stock market's rally over the past nine months posted the biggest losses, amid questions about whether expectations for their earnings are too high.
Intel, the country's largest maker of semiconductors and one of the two biggest companies on the Nasdaq stock market, fell $8, to $65.25. That took its decline over two days to more than 14 percent. Some 54 million shares of Intel changed hands yesterday, making it the most actively traded stock in Nasdaq history.
Merrill Lynch & Co. helped push down technology shares by cutting investment opinions on Intel, LSI Logic Corp. and Texas Instruments Inc. before the market opened.
International Business Machines Corp. dropped $5.75 to $101.25. Tuesday, IBM said second-quarter sales grew at
TC slower-than-expected pace and said computer prices are likely to drop.
Among other leading computer companies, Texas Instruments shares plunged $7.25, to $148.25; LSI fell $2.75, to $43.75 and Compaq Computer Corp. fell $2.375, to $45.
Caterpillar Inc. declined $2.25 to $69.125. The construction equipment maker, whose shares fell $2.50 Tuesday, warned that demand for its products is weakening in the second half of 1995. It also reported second-quarter earnings above analysts' forecasts, helped by rising overseas profits and a weak U.S. dollar.
Boeing Co. dropped $1.25, to $62.75 and International Paper Co. fell $1.125 to $84.375.