Computer shares send market downward Microsoft, IBM declines help lead Dow to its biggest drop in 2 weeks

NEW YORK — NEW YORK -- U.S. stocks recorded their biggest loss in almost two weeks yesterday as investors soured on shares of computer and software companies.

Microsoft Corp. touched off the retreat, telling investors that its revenue may be less than expected this quarter because an upgrade to a line of business software may come later than expected. The warning rattled confidence in computer stocks, many of which had climbed 20 percent since July's market slump.


The Dow Jones industrial average sank 29.07 to 6,061.80, its biggest one-day drop since Oct. 9, also a day of disappointing earnings outlooks. The 30-stock average, which reached an all-time high of 6,133.70 during trading Monday, was driven lower by International Business Machines Corp., which dropped $3.125 to $127.

Among broader measures, the Nasdaq composite index, filled with computer-related stocks, fell 16.41 to 1,220.00. The Standard & Poor's 500 index slipped 3.28 to 706.57, its second drop in a row.


The Russell 2,000 index of small capitalization stocks fell 3.28 to 342.82; the Wilshire 5,000 index, which set three records in the previous six days, fell 47.16 to 6,880.26; the American Stock Exchange market value index dropped 3.58 to 573.29; and the S&P; 400 midcap index slid 1.8 to 242.82.

Microsoft shares slid $1.50 to $132.50, even though the 98 cents a share it earned in the fiscal first quarter beat Wall Street's average estimate by 8 cents. The company said Office 97, the new version of the company's spreadsheet and word-processing package, won't begin reaching customers until December. Because the company probably won't start booking sales of Office 97 this quarter, investors had to rework their earnings projections for Microsoft.

General Motors Corp. bucked the overall market's trend, climbing 75 cents to $54.625. Canadian Auto Workers negotiators voted unanimously to accept a tentative new national contract with the No. 1 U.S. automaker, ending a 20-day strike that paralyzed GM's Canadian operations and several key plants in the United States.

About 1,541 stocks fell and 915 issues fell on the New York Stock Exchange, where some 410.8 million shares traded. The three-month daily average volume is 379 million shares.

As disappointing earnings from Digital Equipment Corp. sent its stock down $5.375 to $29, the Pacific Stock Exchange high-tech index, up 24 percent since July 22, fell 3.58 to 219.74. Intel Corp. slid $2.25 to $105.50; BMC Software Inc. shed $2.75 to $80.50; Sun Microsystems Inc. dropped $1.1875 to $59.125; Gateway 2000 Inc. slipped $1.375 to $52.625; Oracle Corp. weakened $1.125 to $42; and Adobe Systems Inc. dropped $1.25 to $34.50.

Vitesse Semiconductor Corp. suffered the same ailment as Microsoft. The computer chip maker's shares fell $3.875 to $31.625 even though its fiscal fourth-quarter profit of 21 cents a share beat estimates by a penny. Vitesse filed to sell 3 million additional shares.

Eastman Chemical Co.'s shares fell $1.25 to $53.125 after it said lower prices for its plastics will cause second-half earnings to fall fTC below first-half levels. And Garden Ridge Corp., a retailer, fell $4.875 to $8.625 after it said fourth-quarter earnings may not match expectations.

Salomon Inc.'s shareholders were unsatisfied, sending the company's stock down $3.25 to $45.375. The securities firm said third-quarter earnings fell 58 percent because profits from wagering its own capital plunged. Salomon's net income of 88 cents a share was less than the $1.30 expected.


Drug companies beat expectations. Bristol-Myers Squibb Co. said net income rose to $1.50 a share, beating estimates of $1.48. Eli Lilly & Co.'s profit from operations of 76 cents a share topped the 64 cents analysts were awaiting.

Bristol-Myers rose $2.50 to $106.50; Eli Lilly jumped 50 cents to $69.25; Merck & Co. climbed 37.5 cents to $75.375; and Pharmacia & Upjohn Inc. gained 50 cents to $36.875.

Pub Date: 10/23/96