Technology shares lead stocks lower


NEW YORK -- U.S. stocks fell yesterday as technology companies weakened and Treasury bond yields rose, undercutting the foundations of this year's stock-market rally.

Software, semiconductor and computer makers tumbled amid speculation the Justice Department is close to filing suit to stop shipments of Microsoft Corp.'s Windows95 program. Some investors' earnings expectations for technology companies may also be too optimistic, analysts said.

"Technology stocks are going to be volatile," said Todd Clark, senior trader at Rodman & Renshaw Inc. "They've been the leaders, and they're not going to give up easy, but Microsoft's stock sure discounts a lot of good news. If it goes, it should take the tech group with it."

The Dow Jones industrial average fell 17.26, to 4,715.51, after falling as much as 27.12, paced by declines in International Paper Co., Exxon Corp. and Caterpillar Inc. For the week, the average climbed 91.22 or 1.97 percent.

The Nasdaq composite index, chock full of technology stocks, fell 5.38, to 1,005.28. Microsoft, Intel Corp., Cisco Systems Inc., Oracle Corp. and American Power Conversion Corp. hurt the index the most.

An investment downgrade of Applied Materials Inc. at Smith Barney Inc. further dampened sentiment toward technology issues, traders said.

Standard & Poor's 500-stock index dropped 2.29, to 562.93. Oil, retail, electrical equipment and electric utility stocks also contributed to the loss.

More than 11 stocks fell on the New York Stock Exchange for every 10 that gained. For a 15th day, Nasdaq volume of 412.9 million shares outdistanced Big Board volume of 303.8 million.

The Wilshire 5000 index dropped 15.61 to 5,564.26. The Russell 2000 index of small-company stocks set a record at 299.23, up 0.48, as did the American Stock Exchange market value index, up 0.49 to 522.07.

Speculation swirled about whether the government will allow the Windows95 program to include access software to the planned Microsoft Network on-line service.

In recent weeks, "We cut back our Microsoft position because of concern over the Justice Department," said William Harnisch, president of Forstmann Leff Associates, which manages assets of $3 billion.

"The Microsoft Network piece of Windows95 is very, very significant."

At midday, Microsoft's chairman and chief executive officer, Bill Gates, said it's unlikely the Justice Department will ask a court to stop the company from shipping Windows95. Microsoft, at one stage as much as $4.50 lower, dropped $3.875, to $92.875.

Other software stocks suffered, too. Oracle dropped $1.25, to $42.125, and Computer Sciences Corp. slid $2.25, to $58.75.

Yields on 30-year Treasury bonds rose to 6.90 percent from 6.84 percent yesterday as a jump in consumer optimism added to concern the economy won't slow enough to curb inflation.

Shares of electric utilities, whose financing costs rise along with interest rates, and financial companies, whose profit margins narrow, fell as rates rose.

General Public Utilities Corp. eased 62.5 cents, to $28.50, American Electric Power Co. dropped 62.5 cents, to $34.50, MBNA Corp., a credit-card issuer, declined $1.125, to $35.75, American General Corp., an insurer, fell 62.5 cents to $36 and American Express Co. gave up 50 cents, to $37.75.

Oil stocks declined amid speculation petrochemical prices -- and profit margins -- may turn down. Chemical profits have sent oil-company profits higher the past year.

Even with today's decline, "the market's been dynamite," said Joseph DeMarco, head trader at HSBC Asset Management, a unit of Hongkong & Shanghai Bank. For the year as a whole, the Nasdaq composite has surged 33.7 percent and the S&P; 500 is ahead 22.6 percent.

So far this quarter, of the 399 companies in the Standard & Poor's 500 index that have reported earnings, 57 percent announced numbers above analysts' expectations and 29.6 percent were below forecasts. In the first quarter, 53.8 percent of the S&P; 500 companies beat analysts' estimates, while 29.9 percent fell short.

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