Stocks were mixed as concern that earnings growth is slowing kept the Dow Jones Industrial Average short of the 9000 mark.
Computer-related shares gained after Microsoft Corp. said earnings for this quarter will exceed expectations. Makers of toys and drugs declined on concern that their earnings will fall short.
At 3 p.m., the Dow Jones industrial average was down 53.56 at 8,850.88. It had surpassed the 8,900 mark early today and came within 41 points of 9,000.
"There's been a lot of momentum over the past months and especially in the last day or so, but market participants are asking where we can go from here," said Eleanor Hoagland, chief portfolio strategist at AMT Capital Advisers Inc., which administers $6 billion. "There's some concern on earnings, not withstanding Microsoft."
Ms. Hoagland said the Dow is having trouble reaching the 9000 mark because buyers are unsure that earnings reports for the quarter ending Tuesday will show that recent gains by stocks were justified. The Dow is up 13 percent in 1998, more than many investors expected for the entire year.
By 3 p.m., the Standard & Poor's 500 Index dropped 6.43 to 1099.22, while the Nasdaq Composite Index, packed with computer shares, was up 10.32 at 1822.76, after rising to a record 1840.83. Advancing stocks outnumbered those that fell on the New York Stock Exchange by 4-to-3.
Stocks were hurt by a drop in bonds after a report showed a bigger-than-expected jump in home resales. The report is a sign of possible inflation, which is bad for stocks.
As stock indexes reach records, Ms. Hoagland said she is buying medium-size companies.
"The large caps are the ones that have driven the market to date and the leadership will be shifting to smaller companies," she said. She recently bought shares of the MAS Mid Cap Value Fund.
Microsoft rose 4 1/2 to 89 7/1 6 after the world's largest software maker said robust sales of business software are boosting revenue. Microsoft said this quarter's per-share earnings will be a "high-water mark" for calendar 1998 then trail off from that level for the rest of the year as sales of personal computers slow.
Chief financial officer Greg Maffei said per-share earnings will be about 4 cents higher than analysts' average estimate of 44 cents for the fiscal third quarter ending March 31. The Microsoft executive predicted a decline in per-share earnings from quarter to quarter and slower earnings growth.