Microsoft leads stocks lower Dow index up 16 points, but Big Board decliners swamp advancing issues

THE BALTIMORE SUN

NEW YORK -- U.S. stocks fell for a third day yesterday, led by computer shares, as investors fretted that Federal Reserve Chairman Alan Greenspan might roil the market when he speaks to Congress today.

Microsoft Corp. led the decline for a second session, after warning that revenue growth is slowing and that its stock has risen too high to buy back.

Boeing Co. reported earnings below expectations, intensifying concern that stocks are higher than justified by the outlook for profits, even in a low-inflation, steadily growing economy.

The Dow Jones industrial average rose 16.26 to 7,906.72, led by Caterpillar Inc. and AlliedSignal Inc., which are both expected to report earnings this week. The Standard & Poor's 500 index fell 2.36 to 912.94, and the Nasdaq composite index dropped 11.76 to 1,536.23.

Among broad market indexes, the Russell 2,000 index of small capitalization stocks fell 2.45 to 403.44; the Wilshire 5,000 index, comprising stocks on the New York, American and Nasdaq stock exchanges, dropped 30.51 to 8,667.27; the American Stock Exchange composite index lost 3.19 to 630.40; and the S&P; 400 mid-cap index gave up 2.44 to 301.16.

Declining issues swamped advancers by 1,925 to 951 on the New York Stock Exchange. About 460 million shares changed hands, below the daily average of 503 million shares in the past three months.

Greenspan gives his semiannual testimony to Congress today. There is no sign of the troublesome inflation that might prompt the Fed to raise interest rates. But Greenspan has made clear in the past that the market's meteoric rise causes discomfort to Fed officials, who fear that it will spark inflationary spending.

"We are seeing a little bit of nervousness here just ahead of Alan Greenspan's testimony," said James Solloway, director of research for Argus Research Corp. "We've gone up a long way since the middle of April, so some additional pullback shouldn't be all that surprising."

The Dow has soared 25 percent since early December, when Greenspan warned of "irrational exuberance" in financial assets.

Boeing fell $1.5625 to $54.50 yesterday after the aircraft maker's earnings missed estimates for a second straight quarter as management hired thousands of workers and paid overtime to raise production to record levels.

Microsoft fell $4.5625 to $135.9375 in most-active trading of 15.2 million shares. The company's treasurer said last week that the software giant didn't buy back shares during the second quarter because the price was "a little high." The stock soared 38 percent in the second quarter.

Disappointment Friday that Microsoft didn't report blockbuster fiscal fourth-quarter earnings contributed to a 1.33 percent drop in the Nasdaq composite and a 1.62 percent decline in the Dow.

Among other computer stocks that led the market to records last week on expectations for growing profits, Intel Corp. fell 75 cents to $85.6875 yesterday, and Oracle Corp. fell 68.75 cents to $55.1875. Semiconductor maker Texas Instruments Inc., which rose 37 percent this month to a record on Thursday, fell $4.125 to $109.50 yesterday.

Optimism about earnings for personal computer makers helped kick off the last leg of the rally 10 days ago, which culminated Wednesday with the Dow's first close above 8,000. Dell Computer Corp., one of the stellar performers in the rally that led the Dow over 8,000, gained $3.50 to $152.625 yesterday.

Bell Atlantic Corp. and Nynex Corp. helped lift the market from its lows yesterday. Bell Atlantic rose $1.375 to $71.50. Nynex rose $1.5625 to $54.3125.

Tyco International Ltd. rose $1.375 to $78.3125 after the diversified industrial company's earnings exceeded analysts' expectations. The company's businesses include disposable medical products and security systems.

AMP Inc. fell $1.25 to $45.75 after the supplier of electrical and electronic connectors and interconnection systems said it would take a 5-cent-a-share charge against second-quarter earnings to reflect a recent arbitration award in Texas against a subsidiary.

Kimberly-Clark Corp. slumped $4.3125 to $47.3125 after the maker of Huggies diapers and Kleenex tissues said its second-quarter profit fell 3 percent short of expectations.

American Express Co. rose $1.75 to $77.8125. The stock has jumped in fits and starts in recent months as takeover speculation waxes and wanes.

Pub Date: 7/22/97

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