FINANCIAL MARKETS : High-Technology Shares Laid Low in Sell-Off

A massive sell-off of high technology shares dragged blue-chip stocks sharply lower Tuesday and sent the Nasdaq index down 3.25%.

“If you keep whacking the techs, which are bellwethers, what happens sooner or later is that you will erode the blue chips,” said Larry Wachtel, analyst at Prudential Securities.

The Dow Jones industrial average closed down 67.55 points, or 1.30%, at 5,130.13, after having fallen more than 80 points earlier. The plunge activated the New York Stock Exchange’s curbs on index-related trades in late trading.

In the broader market, declining issues led advancers 1,568 to 846 on a Big Board volume of 416 million shares.

The technology-laden Nasdaq composite index fell 33.56 points, or 3.25%, to 998.81. The Philadelphia Stock Exchange semiconductor index slid 14.99 points, or 7.7%, to end at 179.60.

Analysts said the decline was set off by a downgrade to “sell” of several semiconductor stocks, including Applied Materials and Texas Instruments, by influential SoundView Financial analyst Rick Whittington.

“When the Motorolas and the Intels get clobbered, you undercut the overall trend. People are getting very nervous about this,” Wachtel said. He said that the Nasdaq decline is equivalent to a 150-point drop in the Dow industrials.

“The Nasdaq’s plunge is highly demoralizing for the whole market,” said Michael Metz, chief investment strategist at Oppenheimer & Co. “This is, after all, where the real excitement and bull market leadership have been.

“Weakness in the high-techs illustrates the vulnerability of the market to money flows into mutual funds. I have to assume there is huge liquidation going on by mutual funds.”

In addition to the SoundView downgrade, Cowen & Co. analyst Albert Lin said Motorola’s stock could fall into the $40 range if the company’s fourth-quarter earnings fell short of expectations.

After the close of trading on the NYSE, Motorola reported earnings of $432 million, or 72 cents a share--well below Wall Street’s expectations of 88 cents a share.

Motorola closed down 2 5/8 at 53 1/2 in NYSE trading, then dropped to 45 5/8 in after-hours activity.

A third blow came from Symantec, which closed down 5 at 10 3/8. The company had warned Monday that its quarterly earnings would fell below Wall Street expectations.

“The economy is slowing, and that means corporate profits will be poor. Wall Street is just waking up to this fact,” Wachtel said. “There have been about 70 pre-announcements” of weaker than expected earnings.

He said Symantec’s woes put pressure on Microsoft because it said sales of software utilities for the Windows 95 operating system were weak.

“Each one of these high-tech companies is connected to another one,” Wachtel said.

Among the technology stocks that took a beating were Applied Materials, Nasdaq’s most actively traded issue, down 3 3/4 at 33 5/8; Texas Instruments, down 3 7/8 at 45; Intel, down 2 5/8 at 55; Microsoft, down 6 1/16 at 80 3/16 and Dow component IBM, off 2 3/8 at 86 3/4.

Fear of flat or lower fourth-quarter earnings affected bank stocks as well.

Federal National Mortgage Assn. shares were down 1 5/8 at 120 3/8, Citicorp was down 2 at 63 7/8, Chemical Bank was down 1 3/8 at 54 5/8 and Chase Manhattan Bank fell 1 1/2 to 56 3/4.

The federal budget battle did not help the market, but some analysts argued that it didn’t hurt it either.

“Whether there is a budget resolution today or not is not end of world,” one analyst said. “They are trying to make government spend less. Whether they come to an agreement or not, the trend is to spend less. No one is going to get away with spending more. That is the saving grace of the budget.”

Senate Majority Leader Bob Dole (R.-Kan.) said after the stock market closed that the budget talks would be in recess “for a while” and that Republicans would be ready to resume them when President Clinton puts forward new ideas.

Still, uncertainty over the budget contributed to nervousness in the bond market. After seesawing during the day, the yield of the Treasury’s main 30-year bond rose to 6.11% from 6.04% on Monday. The dollar was also affected, slipping to 1.4375 German marks from 1.4387 on Monday and to 104.60 yen from 105.20.

Shares of the Big Three U.S. auto makers, meanwhile, fell because of anticipated cuts in first-quarter production and a major Ford Motor incentive program that is expected to force similar moves by its competitors, analysts said. Ford fell 3/8 to 28 1/4, Chrysler was down 2 3/8 at 53 1/4 and General Motors was down 7/8 at 49 3/4.

Wheat prices posted sharp gains on the Chicago Board of Trade as talk spread of foreign buyers’ rushing to the U.S. markets after the recent price decline. A drop last week and on Monday from 15-year highs lured some big buyers, analysts said.

“Essentially, you have taken wheat [prices] down about $10 a ton,” commodities analyst Joe Christopher said.

CBOT wheat for March delivery settled 12 1/4 cents higher at $4.95 3/4 a bushel.

The Standard & Poor’s composite index of 500 stocks fell 9.01 points to 609.45. The American Stock Exchange index was down 4.66 points at 541.69.

The NYSE Composite index of all listed common stocks fell 3.78 to 327.48. The average price per share fell 44 cents.

The Wilshire Associates Equity Index--the market value of NYSE, American and Nasdaq issues--was 5,956.990, down 92.164 or 1.52%.