NEW YORK -- U.S. stocks retreated yesterday amid concern that the dollar's recent strength will crimp multinational companies' overseas profits. Drug and beverage companies led the slide.
Declines in Merck & Co., Pfizer Inc., Johnson & Johnson and Coca-Cola Co. pushed down the Dow Jones industrial average and the Standard & Poor's 500 index.
In the broader market, the S&P; 500 index, representing three-quarters of the market capitalization of all U.S. stocks, fell 1.41 to 650.17. Volume on the New York Stock Exchange surged to 494.2 million shares from 452.7 million on Tuesday.
Boosted by computer, software and semiconductor shares after Compaq Computer Corp. posted unexpectedly strong first-quarter earnings, the Nasdaq composite index rose 10.07 to 1,176.83, its fifth consecutive record, and 16th this year.
The Russell 2000 index of small-company shares rose 1.12 to a record 344.64 and the Wilshire 5000 index dipped 1.23 to 6466.5.
New York Stock Exchange-listed Compaq surged $3.375 to $47.25. It earned 85 cents a share in its latest quarter, 5 cents better than last year's profit and 3 cents ahead of expectations.
Compaq's report gave investors fresh confidence about profit growth in the personal computer business, said Edward Laux, head trader at Chicago Corp. "Their inventories are at two-year lows. Technology is the leadership sector."
Semiconductor stocks, a big part of Nasdaq, soared after LSI Logic Corp. said it expects revenue and earnings to pick up in the second quarter after a disappointing first quarter. LSI jumped $2.25 to $37 and Intel Corp. rose $2.14 to 70.25. Intel was also raised to a short-term "buy" from "hold" at SoundView Financial Group.
Slumping drug stocks dominated the day, many traders said. "It's the dollar" that's playing havoc with drug company stocks, said Jerry Condon, a money manager in charge of $800 million at Chittenden Bank in Burlington, Vt.
The dollar has risen almost 16 percent against the German mark and 30 percent compared with the Japanese yen since May. Companies with large overseas businesses may see their profits hurt as a result of the dollar's advance.
Johnson & Johnson's international sales accounted for 50 percent of total revenue in the first quarter; Merck's sales outside the United States were 31 percent of revenue in the same period; and Eli Lilly & Co. racked up 44 percent of its sales outside the United States.
J&J;, downgraded to "neutral" from "attractive" at PaineWebber Inc., skidded 75 cents to $89.75, Merck slid $1.375 to $60.375 and Lilly dropped $1.875 to $55.50.
Pub Date: 4/25/96