Semiconductors Fuel Wide Decline; Dow Is Down 132
Concern that slowing economies in Asia will hurt semiconductor companies ignited a broad decline in U.S. stocks Friday, with Texas Instruments, Applied Materials and KLA-Tencor pacing the retreat.
The Dow Jones industrial average fell 132.36, or 1.7%, to 7,715.41, after sliding 186.88 on Thursday--the first time the 30-stock average had back-to-back declines of more than 100 points since the 1987 crash.
Intel’s decision to postpone the opening of a $1.3-billion plant in Texas because of flagging demand for some of its chips also contributed to Friday’s decline.
“Stocks are going to get hammered with any disappointment that comes about,” said William Quinn, president of AMR Investments in Dallas, which oversees $18 billion. A 60% rally in computer chip stocks this year left them vulnerable to bad news, so “semiconductors stocks got socked pretty quickly,” he said.
The Nasdaq composite index, which is filled with computer-related shares, fell 20.33, or 1.2%, to 1,650.92. The Standard & Poor’s 500 Index dropped 9.05, or 0.95%, to 941.64.
For the week, the Dow industrials fell about 1.7%, the S&P; 500 slipped 0.3% and the Nasdaq composite slumped 1%.
About 677.7 million shares changed hands on the New York Stock Exchange, making it the third-busiest day ever at the exchange. The record is 684.6 million shares on Jan. 23, 1997.
Helping keep stocks from falling further was a second-day rally in bonds. The yield on the benchmark 30-year Treasury bond fell to 6.27% from 6.315, lowering the cost of borrowing money for consumers and businesses.
The Morgan Stanley High-Tech Index slumped 14.68, or 3%, to 475.75, its lowest since July 11. Since Wednesday, when Intel reported that third-quarter earnings missed forecasts and warned that its fourth-quarter results might not top expectations, the index is off 10%.
“Intel’s announcement today adds to concern that business is a little slower than expected,” said Graham Tanaka, chief executive of Tanaka Capital Management, which oversees about $300 million. The firm pared its stake in Intel by more than half earlier this month.
Ali Irani, an analyst at Oppenheimer & Co., said U.S. semiconductor equipment companies get about 30% of their sales from Southeast Asia.
Texas Instruments fell $9 to $111.88, KLA-Tencor dropped $5.88 to $52.38, Motorola fell $1.63 to $63.75, Intel fell $1.94 to $80, PeopleSoft fell $2.25 to $61.50, Electronic Arts dropped $1.38 to $37.38, and Linear Technology fell $4.13 to $59.50.
The drop in computer shares was accelerated by a downgrade in the stock recommendation of Applied Materials by Mark FitzGerald, an analyst at UBS Securities. He cut his opinion on the company to “hold” from “buy,” sending Applied Materials down $3.73 to $33.27.
“UBS pulled the plug on them,” said Robert Kahan, senior managing director of equity trading at Nationsbanc Montgomery Securities Inc. in San Francisco.
Among Friday’s highlights:
* Silicon Graphics rose $1.44 to $17.38 amid indications the struggling company will announce major changes Monday. The maker of computer-graphics systems will disclose “near-term” plans when it releases fiscal first-quarter earnings after the market close Monday, spokesman Kevin Burr said. He declined to comment further.
* Avon Products rallied $6.88 to $73.75 after the cosmetics company announced moves intended to save as much as $400 million a year by 2000.
* Utility stocks rallied on lower interest rates, which make their dividends more attractive. Columbia Gas System rose $1.38 to $76, Enron climbed 44 cents to $40.50, and PG&E; rose 25 cents to $24.31.
* A couple of initial public offerings did well. ITC DeltaCom rallied $3.38 to $19.88 after the provider of retail long-distance services to businesses sold 5 million shares in an initial public offering. Fresh Del Monte Produce rallied $1 to $17 in the first day of trading on optimism about the produce distributor’s turnaround potential.
Overseas, Tokyo’s Nikkei stock average rose 1.2%, and Frankfurt’s DAX index rose 1.9%. But London’s FTSE 100 dropped 0.4%, and Paris’s CAC 40 index slipped 0.3%. Mexico City’s Bolsa index fell 2.7%.
Market Roundup, D4
