The stock market sagged yesterday as disappointing technology profits, a sharp drop in housing construction and computerized selling programs drove the Dow Jones industrial average down 57.20 points.
The Dow closed at 1879.14, its lowest point since Dec. 11, for a two-day drop of almost 85 points. Losing stocks outnumbered gainers by 4 to 1 on the New York Stock Exchange. Volume was 181.6 million shares.
Computer and technology stocks suffered widespread losses as the market reacted adversely to the earnings reports of several key high-tech companies.
Falling stock prices, reverberating in the futures markets, caused the price of futures contracts on stock indexes to plunge. This, in turn, kicked off computer-assisted programs in which investors sell stocks represented by the indexes and buy the cheaper futures.
The sell programs caused stock prices to fall even further.
The rout of technology stocks, which spread to other stocks across the market, began Tuesday when analysts said they were disappointed in the profits reported by IBM.
IBM, which dropped 6 on Tuesday, fell 1 5/8 to 110 1/8 yesterday. Motorola was down 4 3/8 to 41. Digital Equipment was down 4 1/4 to 115 1/2.
Motorola said its fourth-quarter earnings rose to 79 cents a share, up from 49 cents in the year-ago quarter. While the earnings improved, as did IBM's, analysts expressed disappointment. Some Wall Street analysts had been expecting between 85 cents and $1 a share from Motorola.
Monte Gordon, research director of Dreyfus Corp., said analysts who examined the earnings reports of IBM, Motorola and Digital Equipment found them to be "flawed" in one way or another.
"This market is giving no quarter, taking no prisoners," Gordon said. "Show them an earnings report that is flawed and they'll take the stocks down."
Charles E. Taylor Jr., information technology analyst at Prudential-Bache Securities, said the selloff was no surprise.
"IBM is the bellwether," he said. "What is bad for IBM is considered a harbinger of things to come for technology stocks." When there is bad news on computer and high-tech stocks, "Everbody heads for the exits."
Taylor pointed to the blanket impact of the market's mood. Even though Microsoft Corp. reported a 79 percent jump in net income for its second quarter yesterday, he said, the market paid no attention to the improvement, and the stock closed off 3 1/4 at 54.
Meanwhile, housing starts were down 16.2 percent in December, the biggest drop in three years. That left 1987 with a decline of 10.4 percent in the construction of new homes and apartments. It was the poorest year since the recession of 1982.
The one bit of good news was a 0.1 percent rise in consumer inflation in December, making the rate 4.4 percent for 1987, with most of the rise from increasing oil prices.
But the bad news held its grip on the market. "The market continues to be edgy to news developments. The volatility of October is still here. A lot of people don't have confidence in the market," said William Tiritilli, research director of Rodman & Renshaw, Chicago.