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FINANCIAL MARKETS

Tech Stocks Decline Amid Glum Forecasts

June 04, 1997|From Times Wire Services

Big-name technology shares pulled back sharply Tuesday amid more gloomy profit forecasts, casting a shadow over an otherwise strong day in the stock market.

The Dow Jones industrial average rose 22.75 points to 7,312.15 but would have been up more than 36 had it not been for its two technology components, IBM and Hewlett-Packard.

Broader indicators were mostly positive, but the big hits taken by stocks such as Intel and Microsoft weighed down the technology-heavy Nasdaq market and the Standard & Poor's 500 list.

The Russell 2,000 index of smaller companies edged lower, snapping its streak of record closes at seven.

Just days after a market-jolting warning from Intel, the technology sector was jostled anew by discouraging outlooks from other technology companies, including Seagate Technology and Bay Networks.

"The summer slowdown is upon us for technology companies. But the bottom line here is that there continues to be big bucks waiting to buy first-tier technology names on weakness," Scott Bleier, chief investment strategist at Prime Charter, said, noting Friday's stunning turnaround from that morning's Intel-led sell-off.

But energy issues extended a seven-week rally on optimism that demand for oil and gas will boom as European economies recover and Asian markets grow.

"You can clearly see people saying to themselves, 'Maybe I can get burned in some of these tech stocks and should be putting my money in some more defensive areas of the market,' " said David Bayer, a money manager at American Express Financial Advisors.

Mobil rose 1 1/4 to a record 141, Amoco jumped 1 5/8 to 91, Royal Dutch Petroleum climbed 3/4 to 195 3/4 and Texaco jumped 1 1/8 to 110 1/2. Texaco set an all-time high of 113 1/4 on May 19.

Among Tuesday's highlights:

* Financial companies, which enjoy stronger profits when interest rates aren't rising, figured prominently among the Dow's gainers. J.P. Morgan rose 2 1/8 to 108 7/8, Travelers Group rose 7/8 to 55 3/4 and American Express rose 3/4 to 69 3/4. The Dow's big decliners were IBM, down 2 3/4 to 84 3/8, and Hewlett-Packard, down 1 1/8 to 51 7/8.

* In the tech sector, Cabletron Systems plunged 15 1/2 to 30 1/4 and Seagate fell 3 5/8 to 38 3/4 as the two most active issues on the New York Stock Exchange. Bay Networks fell 2 to 20 1/4 and Compaq Computer sank 7 5/8 to 100. Dell Computer fell 5 1/4 to 108 1/8 and Cisco Systems fell 3 1/16 to 64 3/4.

* Among the biggest gainers was Ford Motor, which rose 7/8 to 38. The nation's No. 2 auto maker is expected to earn its biggest quarterly profit ever in the second quarter, the Wall Street Journal reported.

* Wal-Mart Stores climbed 1/2 to 30 7/8 after the retailer said it will buy a controlling stake in Cifra, Mexico's largest retailer, for $1.2 billion in cash. It was the company's biggest step yet to expand into faster-growing international markets. Though the stock didn't set a record, it was the highest price since April 1, 1993.

Overseas, Japanese stocks rose to a six-month high, led by smaller computer and semiconductor makers. Tokyo's Nikkei-225 average rose 111.31 points, or 0.54%, to 20,563.16. That's its highest close since Dec. 11.

Coffee prices rose to end a bout of profit taking by traders from 20-year highs as attention returned to tight supplies and concerns about wintry weather in Brazil's coffee region this month.

At the Coffee, Sugar and Cocoa Exchange in New York, coffee for July delivery closed 10.25 cents a pound higher at 264.20 cents.

Since peaking at 318.00 cents a pound Thursday--the highest coffee price since June 1977--the July contract had tumbled nearly 70 cents in the last two trading sessions.

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