Technology stocks dragged the market down for a second straight day Wednesday, pushing the Dow Jones industrial average well below 1900.
Wednesday`s scenario was almost a carbon copy of Tuesday, as earnings disappointments in the high-tech sector caused a selloff in semiconductor and computer stocks. Motorola was blamed for Wednesday`s negative reaction, as IBM was blamed for Tuesday`s decline.
The Dow industrials fell 57.20 points, to 1879.14, its lowest close since it stood at 1867.04 Dec. 11. The index was down 27.52 Tuesday.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange.
Big Board volume totaled 181.66 million shares, up from 153.55 million Tuesday. Nationwide turnover in NYSE-listed issues was 207.74 million shares. The NYSE composite index of all its listed common stocks dropped 3.41 to 136.72.
Standard & Poor`s index of 400 industrials fell 8.39 to 278.41, and the S&P 500-stock composite index was down 6.69 at 242.63.
On Wednesday, however, the decline was more pronounced, as stocks dropped enough to kick in computerized sell programs.
Brokers said weakness in stock-index futures prompted professionals engaged in program trading to buy the futures and sell baskets of individual stocks.
Some market watchers reported that program activity accounted for more than half of Wednesday`s drop in the Dow.
”However, I think this market was heading south on its own,” said one analyst.
The decline was not great enough, however, to trigger NYSE restrictions on program trading.
Last Friday, the NYSE decreed that program traders must turn in manual orders instead of using the designated order turnaround system when the Dow is up or down 75 points. The trial program is in effect through Friday.
”A lot of investors are skittish about the market in general. This is being exacerbated by what is being viewed as a slowdown in the computer market,” said Richard Whittington of Prudential-Bache Securities Inc.
Technology issues are considered a popular place for investors to seek profits in the market from growth and innovation.
”We`re in a negative psychology in the market now. People are looking for bad news and trading against bad news,” said one analyst. ”Even when the earnings reports are good, people are finding fault with them.”
Motorola fell $4.50, to $40.87. International Business Machines, down $6 Tuesday, lost another $1.37, to $110.37.
In addition, a large number of computer and semiconductor stocks, some with ”superb” fourth-quarter results, tumbled in the high-tech selling spree.
Among active technology issues, Compaq Computer dropped $3.50, to $45.37; Digital Equipment fell $4.25, to $115.50; Texas Instruments lost $4.12, to $44.37; and National Semiconductor was off 50 cents, to $10.
Apple Computer, which posted record earnings, fell $3 a share, to $39.75, trading over the counter.
Blue chips adding to the Dow`s decline included Merck, down $8.50, to $145.50; USX, down $1.37, to $30.50; General Electric, down $2, to $43.50; Du Pont, down $2.12, to $78.12; and Philip Morris, down $2.25, to $82.67.
The market got off to a weak start as the dollar lost ground in foreign exchange markets as worries persisted over the U.S. trade gap with Japan.
A rumor that Friday`s U.S. government trade report had significantly underestimated the November deficit caused a heavy dollar selloff in early European trading.
Though the rumor was determined to be unfounded, the dollar`s weakness carried over to domestic trading.
In economic news, the government reported a 0.1 percent increase in the consumer price index for December. The inflation rate for the year was 4.4 percent, the highest since 1981.
The Commerce Department also reported an unexpectedly large 16.2 percent drop in housing starts for the month.
