Drug and Technology Selloff Clips Dow : Market Overview

Heavy selling of health care and technology stocks sparked a broad market decline. The Dow Jones industrials lost 16.21 points to 3,426.74.

* News of a 0.3% rise in February consumer inflation was surprisingly well received in the bond market, where yields fell.

Stocks

Another flurry of disappointing first-quarter earnings previews hurt sentiment, leaving the market vulnerable to profit takers.

A report that industrial production rose 0.4% in February encouraged some buyers, but sellers took control as the day wore on.

On Tuesday, drug firms Lilly and Marion Merrell Dow had warned that first-quarter earnings would be below expectations.

Wednesday, brewer Anheuser-Busch, food giant CPC International and computer parts maker Western Digital joined that chorus.

By the close, losing stocks outnumbered winners by 11 to 7 on the Big Board, on moderate volume of 241 million shares.

Analysts said blue chip trading may have been affected by unwinding of futures and options trading tactics. Key futures and options contracts expire Friday.

Meanwhile, the NASDAQ market of smaller stocks was hit hard by a decline in tech issues. The NASDAQ composite index sank 8.07 points, or 1.2%, to 687.40.

Among the market highlights:

* Drug stocks continued to decline in the wake of the Lilly and Marion Merrell news. Lilly fell 1 to 47 3/4, Marion Merrell lost 3/8 to 18 1/2, Johnson & Johnson dropped 1 5/8 to 40 3/8, Pfizer slid 1 5/8 to 58 3/8, Merck tumbled 1 1/8 to 36 5/8, and Biogen eased 1 to 29 1/2.

Also, medical-device makers slumped after a story in Wednesday’s Washington Post suggested that the Clinton Administration may impose price controls. Medtronic dropped 4 1/4 to 71 3/4, St. Jude Medical lost 1 3/4 to 30 1/4, and U.S. Surgical fell 2 3/8 to 58 1/4.

* Food producer CPC tumbled 3 5/8 to 45 5/8 after warning that it may be difficult to achieve double-digit earnings growth this year because of slow sales in Europe.

Also, Anheuser-Busch slid 2 1/4 to 50 3/4 after forecasting a 7% decline in first-quarter earnings. It blamed bad weather and a weak economy in some regions, as well as changes in shipping patterns.

* Semiconductor stocks plunged following the Commerce Department’s decision to impose unexpectedly light tariffs on Korean computer chip imports. That heightened fears of increased competition for some commodity chip suppliers. However, some analysts said the stock selloff was overdone.

Among leading chip firms, Intel plummeted 5 to 114 3/4, Micron Technology fell 4 to 23 7/8, Texas Instruments declined 2 3/4 to 59 5/8, and Motorola lost 2 to 64.

* Energy issues were a bright spot, reviving after a recent slide. Chevron leaped 1 3/8 to 79 1/8, Arco added 1 to 118 7/8, Enron gained 2 3/8 to 62, and Sonat added 7/8 to 53 1/4.

* Among Southland issues, Western Digital, which makes computer disk drives, fell 1 1/2 to 6 5/8. It said pricing pressures would keep third-quarter earnings “significantly below” estimates.

Also, aerospace firm Whittaker said earnings in the current quarter will be flat to down, though it still expects a 10% gain for the year. The stock lost 3/8 to 15 1/2.

Overseas, London’s FTSE-100 index slumped 29.4 points to 2,889.9, while Frankfurt’s DAX index lost 12.75 points to 1,685.08.

In Tokyo, however, the rally continued: The Nikkei index jumped 205.07 points to 18,173.37.

Other Markets

Bond yields closed lower despite a report that consumer prices rose 0.3% in February.

The inflation report, while on target, sparked selling of bonds early in the day because analysts hoped to see a lower number.

But buyers returned to the market later, and by the close the yield on 30-year Treasury bonds slipped to 6.865% from 6.87% on Tuesday. Yields on short-term bonds dropped more sharply.

Federal Reserve Chairman Alan Greenspan may have helped the market by downplaying the consumer price report, along with the large jump in wholesale prices reported last week.

“While we must clearly remain vigilant, my inclination is to view the latest data as aberrations,” Greenspan told Congress.

Elsewhere, the dollar ended narrowly mixed against most major currencies in dull trading.

On New York’s Comex, near-term gold futures rose 20 cents to $329.30 an ounce. Silver slipped 2.5 cents to $3.62.

April light, sweet crude oil futures settled at $20.17 a barrel, up 4 cents, at the New York Merc.

Market Roundup, D6