NEW YORK -- U.S. stocks fell yesterday after Intel Corp. warned that its revenue growth in the first three months of 1997 won't top the previous quarter's.
The forecast sent Intel shares tumbling $5.125 to $142, and raised speculation that if one of America's most profitable companies is slowing down, the best may be behind for others, too.
Intel's warning particularly hurt computer stocks such as International Business Machines Corp., off $2.391 at $164.625, which led the Dow Jones industrial average's retreat. The 30-stock average fell 35.41 to 6,726.88 in a jagged session, in which rallies collapsed on multiple occasions. Stocks' drops snapped a string of three consecutive record finishes for major indexes.
The benchmark Standard & Poor's 500 index fell 1.66 to 767.20, led by computer-industry shares. The Nasdaq composite index, full of computer-related companies that see Intel as a bellwether, lost 12.83 to 1,333.53.
Reflecting the broader market, the Russell 2,000 index of small capitalization stocks lost 0.33 to 367.19; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq exchanges, dropped 11.65 to 7,246.47; the American Stock Exchange composite index fell 1.87 to 586.48; and the S&P; midcap index slid 0.58 to 262.03.
Companies that rose and companies that fell were almost evenly matched on the New York Stock Exchange, where 525 million shares exchanged hands.
A host of smaller companies spanning finance, airline and energy reported unexpectedly strong earnings, tempering Intel's disappointing forecast.
State Street Boston Corp., H. F. Ahmanson & Co. and Rowan Cos. were among those that cheered investors. State Street said profit jumped 19 percent, in large part from a surge in processing securities, and its shares rose 87.5 cents to $71.25.
Ahmanson rose 37.5 cents to $34.125 after reporting that net income jumped 50 percent, beating estimates. Rowan rose 37.5 cents to $28.50 after earnings rose to 27 cents a share from 7 cents as its oil rigs ran at nearly 100 percent of capacity in the period.
The yield on the benchmark 30-year Treasury bond rose 2 basis points to 6.79 percent.
Intel, the world's biggest maker of microprocessors, said rising costs, price cuts and a seasonal dip in demand will hamper profits this quarter.
The warning overshadowed stellar earnings. Intel's fourth- quarter profit rose to $1.91 billion, or $2.13 a share, up 117 percent from the same quarter a year earlier, handily beating the average forecast of $1.83.
Intel issued a similar warning about first-quarter revenue when it reported earnings on Jan. 17, 1996, sending its shares down 12 percent. The stock recovered to rise 176 percent in the year to yesterday.
Network software writer Peoplesoft Inc. fell $2 to $52; network builder Cisco Systems Inc. slipped $1.75 to $70.375; and modem maker U.S. Robotics Corp. dropped $3.75 to $69.25.
Not all computer-industry shares fell. In a semiconductor equipment buyout, KLA Instruments Corp. said it would trade one of its shares for each of Tencor Instruments' 31 million shares outstanding in a transaction valued at $1.27 billion.
KLA fell 37.5 cents to $40.50, and Tencor jumped $5.375 to $35.875. Tencor shares traded at $46 in July 1995.
Other chip equipment companies rallied. Applied Materials Inc. rose $1.25 to $44.875. Novellus Systems Inc. rose $2 to $65.75.
Chip maker Advanced Micro Devices Inc. rose $1.125 to $33.625 after Byron Wien, Morgan Stanley & Co.'s chief U.S. strategist, chose it to replace United Technologies Corp. on his "fresh money buys" list.
Dow industrials member United Technologies Corp., which makes jet engines and air conditioners, fell $1.75 to $67. Wien kept United Technologies' stock in his model portfolio.
Pub Date: 1/16/97