Tech Stocks Lead Decline in Light Trading
Stocks fell in light trading Friday ahead of the holiday weekend as technology stocks took a hit on worries about earnings.
The Dow Jones industrial average fell 17.93 points, or 0.2%, to 9,114.44, while the technology-heavy Nasdaq composite index fell 15.99 to 1,805, a decline of 0.9%.
Financial markets are closed Monday for the Memorial Day holiday. Many investors had moved to the sidelines before Friday’s quiet session.
“Generally speaking, it’s a market without messages,” said Hugh Johnson, chief investment officer at First Albany. “But in the computer stocks, there are growing worries about the earnings picture.”
In the broader market, declining issues led advancers, 1,777 to 1,058, on volume of 443.6 million shares, the second-lowest this year. For the week, the Dow rose 18.44 points.
Investors are worried that Asia’s economic problems, coupled with stiff price competition in the industry, will hurt profits at U.S. computer makers and other high-tech companies.
With the second-quarter reporting season ahead, some companies are already starting to announce that profits may disappoint Wall Street. Some opening shots have already been fired.
“They’re taking their profits and getting out before the bombs hit,” said Guy Truicko, equity portfolio manager at Unity Management, referring to investors.
In currency markets, the dollar gained against the yen after Japan’s central bank released the minutes of an April 9 meeting that suggested another cut in interest rates may be warranted.
The dollar rose to 135.88 yen in New York from 134.78 Thursday.
Lower rates in Japan would tend to weaken the yen as investors sought to put money to work in countries with higher rates.
Meanwhile, minutes of the Federal Reserve Board’s March meeting released Thursday showed the U.S. central bank was leaning toward raising rates if the economy fails to slow on its own.
Foreign exchange trading wound down in midafternoon ahead of the Memorial Day weekend.
Bond prices barely changed in shortened trading ahead of the holiday weekend. The yield on the 30-year Treasury bond fell to 5.90% from 5.92% Thursday. Trading was thin as there wasn’t any significant economic news to guide investors.
Crude oil for July delivery rose 15 cents to $14.78 a barrel at the New York Mercantile Exchange.
Gold fell $1.00 to $299.70 an ounce on the New York Commodity Exchange.
On Wall Street, worries about tech earnings started with circuit maker Analog Devices on Wednesday and deepened with Manugistics Group Inc. and Smart Modular Technologies Inc.
Late Thursday, Manugistics said it will post a loss in the latest quarter but blamed it on internal issues. Manugistics tumbled about 40% to close at $29.25, off $18.63.
Brokerage Morgan Stanley Dean Witter downgraded Smart Modular, saying the outlook is uncertain due to sluggish demand from computer makers using its memory modules. The stock fell $7.75 to $13.88.
IBM Corp. fell $1.69 to $121.94 as the second-weakest Dow component after Caterpillar, which fell $2.13 to $58.56.
Compaq Computer fell 75 cents to $27.75 as the most active issue on the New York Stock Exchange, while Dell Computer fell $1.33 to $85.73 as the most active Nasdaq issue. Dell has fallen three straight days after posting a quarterly profit that topped most expectations but fell short of Wall Street’s most optimistic forecasts.
Also in the technology sector, Seagate Technology Ltd. fell $1.13, or 4.8%, to $22.75 after the world’s biggest maker of computer hard disk drives said it will spend less in the fiscal year ending June 30 than it budgeted as it strengthens its balance sheet.
In the broader market, the Standard & Poor’s 500 index fell 4.17 points to 1,110.47.
The NYSE composite index fell 2.12 to 574.78. The average share lost 18 cents.
The American Stock Exchange index lost 1.79 to 730.57.
The Wilshire Associates Equity Index, the market value of the NYSE, American and Nasdaq issues, fell 46.950 to 10,497.711, a drop of 0.5%.
Among other market highlights:
* Pfizer fell $3.69 to $105.44 on news of six deaths among men who have taken its impotence drug, Viagra. The Food and Drug Administration said it was probing the deaths with Pfizer, but it was not clear if the deaths were caused by the drug. Viagra will remain on the market, an FDA spokesman said.
* U.S. Surgical Corp. shares rose $2.31, or 6.3%, to $39.25 on speculation that the surgical products maker will be acquired. Possible buyers include Tyco International Inc., a manufacturing and service company, and Medtronic Inc., best known as a maker of heart pacemakers and valves.
* Ciena Corp. fell $2.81 to $49.25 after the phone-equipment maker said it doesn’t know when orders from its biggest customers, WorldCom Inc. and AT&T; Corp., will pick up. The company said it still expects to meet fiscal 1998 sales targets of $600 million.
* Computer Horizons Corp., which helps businesses set up and run computer systems, fell $1.69, or 5.2%, to $33.25. The company said it will acquire Britain’s Spargo Consulting for $67.4 million in stock to expand its international consulting business.
* Sprint Corp. rose $2, or 2.8%, to $73.69 on reports the telecommunications company and three cable television partners plan to sell about a 10% stake in Sprint PCS, their wireless phone service, to the public for $1 billion.
* Autodesk Inc. fell $2.50, or 5.6%, to $42 after the software company was downgraded to “market perform” from “attractive” by analyst John Rossi at BancAmerica Robertson Stephens.
