Stocks fall as earnings disappoint Dow industrials shed 27 points after 3 days of strong gains

NEW YORK — NEW YORK -- U.S. stocks slid yesterday after weaker-than-expected earnings from Texas Instruments Inc., Cummins Engine Co. and Monsanto Co. sapped optimism that corporate profits will exceed analysts' forecasts this year.

The decline ended the biggest three-day rally in the Dow Jones industrial average since February 1993, an advance helped by dazzling earnings reports from International Business Machines Corp. and Caterpillar Inc.


Rising Treasury bond yields also hurt stocks. Investors were concerned that President Clinton might scuttle budget talks in his State of the Union address, sending bond yields higher and raising corporate borrowing costs.

The Dow industrials, ahead 152.46 points in the previous three days, dropped 27.09 to 5,192.27. Chevron Corp. led the slump. Declining stocks outpaced advancing issues on the New York Stock Exchange by nearly 12 to 11.


Earnings announcements from two computer disk-drive makers helped push the Nasdaq composite index lower. Earnings at Read-Rite Corp. matched but didn't surpass estimates, and Komag Inc. warned of weaker earnings in coming months. Read-Rite slumped $4.50, to $20.50, and Komag fell $3.3125, to $26.8125.

The Standard & Poor's 500 index fell 0.61, to 612.79, and the Nasdaq declined 1.40, to 1,028.04.

The Russell 2,000 index of small-company shares rose 1.14, to 308.31; the Wilshire 5,000 dropped 1.47, to 6,002.32; and the American Stock Exchange market value index rose 1.85, to 533.56.

Disappointingly weak earnings from Texas Instruments, Cummins and others marred some investors' confidence that profits might expand beyond expectations. Texas Instruments slid $2.125, to $46.50; Cummins dropped 75 cents, to $37.25; and Monsanto fell $2.375, to $120.625.

Texas Instruments, a leading semiconductor maker, posted fourth-quarter net income of $1.50 a share, up from 99 cents last year but 9 cents below analysts' forecast.

Cummins, a truck engine maker, said fourth-quarter net income fell to $1.05 from $1.68 a year ago, below forecasts of $1.25.

Of the 188 companies in the Standard & Poor's 500 index that have reported quarterly earnings so far, 47.3 percent were above projections while 36.2 percent lagged. At a similar point in October, 55.2 percent of companies were ahead of expectations while 33.8 percent fell below.

Yesterday's earnings announcements contrasted with better-than-expected profits from IBM, Caterpillar, Chrysler Corp. and other leading companies that had buoyed stock prices since last Wednesday.


A broad array of companies slid yesterday after posting quarterly earnings: United Airlines parent UAL Corp. was down $4.875, to $163.625; Atlantic Richfield Co. weakened $1.50, to $111.625; and American Express Co. fell $1.25, to $41.50.

Other stocks that fell after earnings announcements included software publisher Marcam Corp., down $2.50, to $12.75; drug maker Gilead Sciences Inc., 75 cents lower at $37.75, computer maker HBO & Co., down $1.625, to $79.50; machine vision developer Cognex Corp., down $5.4375, to $26.5625; and insurer MBIA Inc., off $2.75 at $71.75.

Oil stocks tumbled amid speculation that the United Nations may allow Iraq to export limited amounts of crude oil.

Exxon dropped $1.625, to $78; Chevron fell $1.875, to $51.75; and Royal Dutch Petroleum Co. fell $1 to, $135.125.

The Nasdaq composite index fell in reaction to Sun Microsystems Inc. -- down $4.4375, to $44.125 and the most active stock in composite trading -- amid reports that it may be considering buying Apple Computer Inc. for $33 a share in stock, or about $4 billion. Apple gained $1.125, to $31.625.

Lower prices for a host of computer, software and semiconductor companies drove down Microsoft Corp. $2.50 to $89.50.