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Inflation Fears, Intel Earnings Rattle Investors

Investors bristled at a disappointing earnings report from Intel and more signs of inflationary pressure, but stocks only slipped Wednesday as the overall flow of third-quarter profit reports remained encouraging.

The Dow Jones industrial average fell 38.31 to 8,057.98. Broader stock measures also fell modestly as interest rates rose in the bond market after a stronger-than-expected reading on September’s retail sales fueled fears the Federal Reserve may slow the economy to guard against rapid inflation.

Intel’s third-quarter profit report, released late Tuesday, set the tone for Wednesday’s trading.

The bellwether of the semiconductor industry reported a 21 percent increase in earnings compared with last year’s third-quarter, but the results came in slightly shy of many Wall Street forecasts.

The disappointment over Intel “would have been a good catalyst to drill the market,” said Rick Jandrain, chief investment officer for equity securities at Banc One Investment Advisors in Columbus, Ohio.

Jandrain and other analysts said the blow from Intel’s report was softened by the overall trend toward better-than-expected profits from other companies.

Declining issues outnumbered advancers by a 7-to-5 margin on the New York Stock Exchange, with 1,203 up, 1,672 down and 553 unchanged.

Some of the stocks that moved substantially or traded heavily Wednesday:


Ford Motor, down 7/16 at 49-1/8.

The automaker’s third-quarter earnings climbed 64 percent from a year ago as strong car and truck sales in the United States helped it beat Wall Street expectations.

Caterpillar, down 3/4 at 60.

The heavy-equipment maker’s third-quarter profit rose 24 percent, easily beating forecasts, but the company warned that 1998 sales will only slightly surpass 1997 levels, partly due to weak demand in Japan, Australia and Russia.

Barnes & Noble, down 2-7/8 at 28-7/8.

The book retailer’s investment rating was downgraded by Brown Brothers Harriman and Furman Selz, Dow Jones Newswires reported.


Intel, down 5-3/16 at 86-11/16.

The semiconductor industry bellwether reported a 21 percent improvement in third-quarter profits, but the results came in slightly shy of many forecasts.

MCI Communications, up 19/16 at 36-11/16.

WorldCom, down 1-5/16 at 35-7/16.

GTE (NYSE), down 2-3/16 at 48.

Escalating a bidding war for the nation’s second-largest long-distance phone company, GTE offered $28 billion in cash to buy MCI. The offer came two weeks after WorldCom offered $30 billion in stock to top a $21 billion deal between British Telecom and MCI.