Techs Lead Stocks Down; Dow Off 29
U.S. stocks recorded their biggest loss in almost two weeks as investors soured on shares of computer and software companies, speculating that the three-month-long rally has little room left to run.
That rally in software and computer stocks “happened too quickly,” said Lary Aasheim, a technology stock analyst at Core-States Investment Advisers. “The stocks ran up quite a bit, so the companies needed to have a blowout quarter just to keep their stocks where they were.”
Microsoft touched off the retreat, telling investors that its revenue may be less than expected this quarter. And Digital Equipment reported a bigger-than-expected loss. Microsoft closed at 132 1/2, down 1 1/2; Digital closed at 29, down 5 3/8.
“They sold IBM, they sold Microsoft and they decimated Digital,” said Ralph Bloch, chief market analyst at Raymond James & Associates in St. Petersburg, Fla. “What does that tell you when a strong earnings report sees a stock sell-off, and when you get a bad report they take the stock behind the shed and shoot it? This is not a healthy description of a stock market.”
The Dow Jones industrial average closed down 29.07 points at 6,061.80, having recovered somewhat during the last hour of trading from what had been a 53-point loss.
Broader measures also fell, with the biggest losses coming in the technology-laden Nasdaq market.
Stocks were also pressured by a bond market in which interest rates rose as prices fell on concerns about inflation and a flood of new borrowing through Treasury securities auctioned by the government this week. The yield on the 30-year Treasury bond rose to 6.85% from 6.80% late Monday.
The government started this week’s Treasury re-funding Tuesday, auctioning $18.28 billion in new two-year notes at 5.93%, down from 6.08% on Sept. 25 and the lowest rate since Feb. 27. The notes will carry a coupon interest rate of 5.875%.
Although the two-year auction was well received, traders drove down the price of short-term securities in anticipation of the Treasury’s auction today of $12.5 billion of five-year notes.
Analysts said the bond market might have been responding to an unconfirmed report by Market News Service Inc., a financial news agency, that the Clinton administration might attempt to “talk down” the dollar if the U.S. trade gap with Japan doesn’t narrow.
Among market highlights:
* Managed care was a hard-hit sector--industry analysts cited investor nervousness about earnings. Among the big losers, Oxford Health fell 3 1/8 to 41 1/4, United Health shed 1 3/4 to 36 3/4, PacifiCare Health Systems lost 2 15/16 to 68-5/16 and FHP International fell 1/2 to 35 1/4.
HMO-related companies were also hurt. Amisys Managed plunged 5, or 20 %, to 30. Medaphis tumbled 6 3/8 to 10 3/8, or 38 %, after reporting a much wider than expected third-quarter loss.
* Salomon lost 3 1/4 to 45 3/8 after reporting a drop in third-quarter earnings.
* Ontrack Data International, a data recovery company, rose 2 1/2 to 14 1/2 in its first day of trading.
Overseas, Tokyo’s Nikkei-225 stock average fell 0.8%, Frankfurt’s DAX index fell 0.4% and London’s FTSE-100 fell 0.4%.
