Stocks fall from record heights Dow drops 26 points as earnings reports dampen enthusiasm

NEW YORK — NEW YORK -- U.S. stocks fell yesterday as disappointing earnings from Procter & Gamble Co. and AT&T; Corp. rattled expectations that 1996 profits will beat forecasts.

The results disrupted a weeklong string of better-than-expected profit reports that spurred a 3.5 percent rally in the Dow Jones industrial average and helped it reach two records in four days.


The Dow industrials fell 26.01 to 5,216.83 after rallying 50.57 to a record 5,242.84 Wednesday. The 30-stock average was down about 10 points before a series of computer-guided orders to sell stocks at 3:30 p.m., according to Birinyi Associates Inc. P&G; fell $2.50 to $85.75 and AT&T; dropped 87.5 cents to $64.375, helping lead the decline.

Among broad stock indexes, the Nasdaq composite index slid 7.51 to 1,035.95 as shares of Microsoft Corp., Oracle Corp. and Bay Networks Inc. dropped. The Standard & Poor's 500 index, representing 70 percent of the market capitalization of all U.S. stocks, fell 2.93 to 617.03.


Rising Treasury bond yields also hurt stock prices. The yield on the benchmark 30-year Treasury bonds rose to 6.10 percent from the day's low of 6 percent.

More than six stocks fell for every five that rose on the New York Stock Exchange, where 453.3 million shares changed hands. The three-month daily average volume is 385 million shares.

Yesterday's most active stocks in U.S. composite trading were Loewen Group Inc., Micron Technology Inc., Intel Corp., Hasbro and Novell Inc.

More than 3.6 million shares of ESC Medical Systems Ltd. traded and the stock rallied $12 to $27. The maker of a device to treat varicose veins sold 3.1 million shares to the public in an initial public offering.

Among broad market indexes, the Russell 2,000 index of small capitalization stocks rose 0.13 to 310.56; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 24.53 to 6,043.66; the American Stock Exchange market value index gained 4.13 to 541.64; and the S&P; 400 midcap index fell 1.23 to 215.67.

Disappointing earnings reports from some of the nation's biggest companies squelched enthusiasm about corporate profits hatched from some dazzling earnings reports last week. Of the 264 companies in the S&P; 500 to report earnings so far, 48.1 percent were ahead of expectations while 36.4 percent fell below. A similar tally last week showed 42.7 percent of companies posting positive surprises while 37.5 percent lagged forecasts.

Procter & Gamble posted fiscal second-quarter profits of $1.18 a share, up from $1.16 last year but below analysts' estimates of $1.20. Its shares dropped $2.50 to 85.75.

AT&T; shares slid 87.5 cents to $64.375. The country's biggest phone company reported net income of 94 cents for the fourth quarter, higher than last year's 85 cents but beneath forecasts of 96 cents.


Coca-Cola Co. stock slipped $1.50 to $73.625 after the world's fTC biggest soft-drink company said it earned 52 cents a share in the quarter, matching analysts' estimates and above last year's earnings of 44 cents.

Among the day's best performers was toy maker Hasbro Inc., which saw its shares surge $9.875 to $40.50. Wednesday, Mattel Inc. offered to buy the company for $5.2 billion, a corporate marriage that would join Mattel's Barbie with Hasbro's G.I. Joe.

The market's losses would have been greater were it not for better-than-expected earnings from companies such as Schering-Plough, McDonald's Corp. and Novellus.

Schering-Plough rose 75 cents to $53.25. The company recorded net income of 66 cents a share, up from profit from continuing operations of 56 cents a year ago, beating expectations of 64 cents.

McDonald's rose 37.5 cents to $49 after reporting that its net income rose to 51 cents a share from the year-earlier 43 cents, topping analysts' estimates of 49 cents.