NEW YORK -- U.S. stocks fell for a third day yesterday after the government filed an antitrust suit against Microsoft Corp. that could prevent the world's biggest personal-computer software company from tapping into new markets quickly.
The suit could have a bigger impact than just slowing down one of the stock market's fastest-growing companies, investors said.
"I don't think the government really thought out the economic consequences," said Elizabeth Bramwell, president of Bramwell Capital Management, which oversees $600 million. "If you slow down product rollouts, you affect job creation and tax revenues."
Oil shares contributed to the market's decline, as the price of crude dropped below $14 a barrel for the first time since March. Losses were tempered by gains in drugmakers and by optimism that Federal Reserve policy-makers will keep benchmark interest rates unchanged at their meeting today.
The Dow Jones Industrial Average fell 45.09, or 0.5 percent, to 9050.91, led by Hewlett-Packard Co., down $3.3125, to $66.125, and Chevron Corp., down $2.3125, to $82.6875. The Dow is down 1.7 percent since setting a record Wednesday. The Standard & Poor's 500 Index lost 2.91, or 0.3 percent, to 1105.82, while the Nasdaq Composite Index dropped 15.15, or 0.8 percent, to 1831.62.
Among other broad market indexes, the Russell 2,000 index of small capitalization stocks fell 4.83, to 467.61; the Wilshire 5,000 index lost 51.26, to 10,485.71; the American Stock Exchange composite index fell 4.73, to 732.36; and the S&P; 400 midcap index fell 2.18, to 366.34. The Bloomberg Maryland index, which tracks the top 100 stocks in Maryland by market valuation, fell 1.05, to 236.84.
Microsoft dropped $3.375, to $86.0625, bringing its loss in the past 3 1/2 weeks to 13 percent.
Microsoft rose about 50 percent annually during the past decade, more than double the S&P; 500 Index's 19 percent annual return. The stock is the S&P; 500's second-biggest, behind only General Electric Co. -- so bad news for Microsoft is troublesome for the market.
More than two stocks fell for every one that rose on the New York Stock Exchange, where 518 million shares changed hands, below the three-month average of 615 million.
The decline in computer shares overshadowed optimism that corporate borrowing costs will stay low. The yield on the benchmark 30-year Treasury bond, which moves opposite to its price, fell to 5.92 percent, from 5.97 percent.
Microsoft's legal problems aren't the only cloud hanging over the computer industry. Last week, Hewlett-Packard and National Semiconductor Corp. warned that profits would fall short of expectations, in the latest signs of slow demand for personal computers. No. 1 PC maker Compaq Computer Corp. slashed prices this year to clear out excess inventory.
Compaq Computer fell $1.0625, to $29.3125, 3Com Corp. slid 81.25 cents, to $29.1875, PeopleSoft Inc. fell $1.1875, to $46.875, and Electronic Arts Inc. fell $1.125, to $44.125.
Dell Computer Corp. was an exception, rallying $4.50, to $94.50, on speculation that the personal-computer maker will beat analysts' expectations when it reports first-quarter earnings today.
Encouraging news on cancer treatments boosted drug stocks. Eli Lilly & Co. rose $1.3125, to $69.75, after the company said its bone-protecting drug Evista cut the risk of breast cancer at least in half for patients in studies of the drug.
Pfizer, which is developing a similar drug, gained $5.75, to $110.375. David Saks of Gruntal & Co. raised his rating on Pfizer to "strong buy" from "buy," on optimism that sales of its potency drug Viagra can sustain momentum. Genentech Inc. gained $2.375, to $72.375, after research showed the company's Herceptin drug helps women with advanced breast cancer fight the disease. The stock is up 19 percent this year.
Pub Date: 5/19/98