Stocks dip, Dow falters after rising eight days If Dow pace continued, index would reach 24,000 in a year

NEW YORK — NEW YORK -- U.S. stocks slipped from records yesterday as investors assessed whether the blistering advance of the past 10 days sent share prices beyond companies' earnings potential.

From the Nov. 5 presidential election through Friday, the Dow Jones industrial average rose at an annual rate of 379 percent -- a pace that would put it at 24,000 in a year.


"If there has been any point since this cycle began in the early '90s, where there was overvaluation, it is now," said Timothy Morris, chief investment officer at Bessemer Trust Co., which oversees $10.2 billion.

The price-earnings ratio for the Standard & Poor's 500 index reached 20.47 Friday, its highest multiple this year.


Yesterday, the Dow industrials snapped an eight-session streak of highs, falling 1.12 to 6,346.91, their first loss since Nov. 1. Gains in International Business Machines Corp. and Boeing Co. were offset by a slump in Texaco Inc.

The broader Standard & Poor's 500 index fell 0.60 to 737.02; the Nasdaq composite index dropped 7.23 to 1,254.57; the Russell 2,000 index of small capitalization stocks slid .58 to 345.94; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, plunged 9.69 to 7,118.49; the American Stock Exchange market value index dropped 1.23 to 584.18; and the S&P; midcap index lost .13 to 252.40.

About 382 million shares traded, with decliners outpacing advancers 1,229 to 1,146. Volume was below the New York Stock Exchange's three-month daily average of 403 million shares.

Maryland stocks fell, led by Youth Services International Inc., which dropped $1.375 to $11.625, and PHH Corp., which lost $1.25 to $44.25.

Drug shares fell, after a rally that sent the S&P; drugs index up 8.8 percent in the first half of the month. Merck & Co., which rose 11 percent in the first half of the month, fell 37.5 cents to $81.625; Pfizer Inc. fell $1 to $88.875; Schering-Plough Corp. dropped 50 cents to $70; and Eli Lilly & Co. fell 12.5 cents to $74.75.

Some banking shares gained, notably Citicorp, which rose 75 cents to $105.25. and Chase Manhattan Bank Corp., which rose $1 to $89.50.

Texaco fell $2.75 to $98.375 in the first trading after it settled a race discrimination lawsuit for $176.1 million.

IBM jumped $1.875 to $146.875 after a Morgan Stanley & Co. analyst raised his 12-month target price for the world's largest computer maker to $170 a share, from $145. Yesterday's move brought IBM's two-day gain to 7.4 percent.


Airline shares gained after Julian Robertson, chairman of Tiger Management Co., USAir Group Inc.'s largest shareholder, said he was bullish on airlines in this weekend's issue of Barron's magazine. AMR Corp. rose $3.25 to $88.50; Delta Air Lines Inc. rose $2.625 to $77.50; and Southwest Airlines Co. rose 75 cents to $24.625. USAir rose $1.875 to $22.375.

British Gas PLC ADRs rose $3.875 to $38.75 after a newspaper reported the Royal Dutch/Shell Group had proposed buying the largest U.K. natural gas supplier by the end of the year. Royal Dutch/Shell Group rose $2.875 to $170.25.

Microsoft Corp. rose $1.375 to $150.375 after the company said it is willing to spend more than $1 billion during the next three years on its Internet and news services before they break even.

Cisco Systems Inc. fell $1.375 to $63.375.

Cortex Pharmaceuticals Inc. rose $2.125 to $5 after the company said studies show that its Ampalex product induces changes in the function of neurons active in memory formation.

Donnkenny Inc. fell $2.875 to $4.1875 after the women's apparel company posted third-quarter net income of 33 cents a share, less than average estimate of 48 cents.


EZ Communications Inc. rose $1.50 to $35.50. American Radio Systems Corp. is expected to complete its acquisition of the radio station operator.

Pub Date: 11/19/96