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Technology Shares Fall Sharply; Bond Yields Up

Markets: Commerce Department report on housing construction fails to calm worries about inflation and interest rates.

June 19, 1996|From Times Wire Services

Technology shares slid sharply Tuesday, leading a nervous market lower, with investors growing increasingly concerned about difficult market conditions for the computer industry.

The Dow Jones industrial average fell 24.75 points to 5,628.03. The blue-chip barometer held a slight gain until midafternoon, then trailed lower with bonds as a tame report on new housing construction failed to calm worries about inflation and interest rates.

"The market's wallowing in indecision and lack of conviction and rapidly shifting opinions," said Eric Miller, chief strategist at Donaldson, Lufkin & Jenrette Securities in San Francisco.

The technology-laden Nasdaq composite index tumbled 24.56 points to 1,183.06, its first close below 1,200 in more than a month. Since setting a record high of 1,249.15 on June 5, the Nasdaq has slid more than 5% amid a series of warnings by industry leaders about market pressures squeezing profits.

The Nasdaq market has been beset by a shift in sentiment among individual investors, Miller said.

"There was some suggestion last week that the flow of money into technology-sector funds had tailed off," he said.

Broader measures were negative too, although not as sharply as the Nasdaq composite.

Declining issues outnumbered advancers by a margin of almost 7 to 6 on the New York Stock Exchange, where volume totaled 363.82 million shares, up considerably from Monday's sluggish pace.

The NYSE's composite index fell 1.34 points to 355.58, the Standard & Poor's 500-stock index fell 3.10 points to 662.06, and the American Stock Exchange's market value index fell 1.54 points to 588.99.

Bonds initially led stocks higher after the Commerce Department reported that housing starts fell 4.7% to 1.43 million in May. Many analysts had predicted a drop only to the 1.48 million level.

But by midday, the yield on the 30-year Treasury bond--a key determinant of corporate and consumer borrowing costs--rose to 7.10%, up from Monday's 7.06%. Early last week, the yield jumped to a 13-month high at 7.20% in the aftermath of the latest in a series of robust employment reports.

Investors have been concerned about recent indications of rising payroll and wage levels, which could translate into too much consumer demand, pushing up prices. Many analysts expect the inflation-leery Federal Reserve Board to raise interest rates in early July to slow borrowing and spending.

Rapid inflation hurts the value of fixed-income investments, such as bonds, and the resulting increases in interest rates can cut into corporate profits.

Among technology stocks on the Nasdaq, Intel slid 1 5/8 to 70 3/8, Cisco Systems fell 1 1/2 to 52 7/8, and Microsoft fell 2 1/4 to 122 3/8. In active NYSE trading, Motorola fell 1 7/8 to 62 3/8, Digital Equipment fell 1 1/2 to 44 1/8, Hewlett Packard fell 1 3/8 to 97 5/8, and IBM fell 1 1/4 to 101 1/4.

Among Tuesday's highlights:

* Airline stocks rose on prospects for improved business after discount competitor ValuJet agreed to temporarily halt operations. ValuJet shares tumbled 3 1/2 to 6 1/2, but competing airlines rose, lifting the Dow Jones transportation index by more than 1%. Direct rivals benefited the most from the news, with Delta adding 3 3/8 to 83 5/8, USAir gaining 3/4 to 18 3/4 and Southwest Airlines rising 1 to 28 5/8.

* Iomega tumbled 10 1/4 to 26 3/4 on news that Mitsubishi Electric was planning to manufacture computer disk drives based on LS-120 technology.

* H.J. Heinz, a maker of catsup and other foods, fell 1 3/8 to 31 1/8 as investors were disappointed by the company's earnings of 45 cents a share for the fiscal fourth quarter, 2 cents above the same quarter last year.

Overseas, Tokyo's Nikkei-225 stock average rose 0.4%; Frankfurt's DAX index rose 0.1%, and London's FTSE-100 fell 0.1%.

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