Tech Issues Put Drag on Stocks; Dow Falls 4.75 : Market Overview
* A wave of selling washed over the technology sector Thursday, dragging stock prices under, and most market gauges lost ground.
* Interest rates on long-term Treasury bonds ended lower after see-sawing in reaction to a government report that wholesale price inflation barely budged last month.
Stocks
The Dow Jones industrial average snapped a string of winning sessions that had carried the blue-chips indicator to two consecutive closing highs. It retreated 4.75 to 3,729.78 after relinquishing some early strength derived from economically sensitive issues.
Weakness in computer chip and other technology stocks was the dominant feature of the session. The selloff, incited by a disappointing reading on business in the semiconductor industry, released late Wednesday, drove the Nasdaq composite index down 6.40 to 761.49.
The fresh inflation news gave traders some pause for concern. Anticipation of another inflation report to be released Friday kept investors on guard and unwilling to make big commitments in the market.
“There was some caution ahead of (the Friday) CPI number, which caused some investors to back away,” said Robert Walberg, senior equity analyst at the money management and research firm MMS International.
The Labor Department’s overall November reading on producer prices was unchanged, showing that the inflation rate held steady at the wholesale level. But the so-called core rate, which excludes food and energy prices, rose by 0.4% last month, or double the expected amount.
Bonds had a bumpy day and stocks seemed to follow.
In the broader market, declining issues outnumbered advancing ones about 4 to 3 on the New York Stock Exchange, on active volume of 287.57 million shares.
Among the market highlights:
* Among chip makers, Intel dropped 1 1/2 to 58; Motorola sank 2 3/4 to 91 1/8 and Texas Instruments fell 3 1/8 to 60 3/8.
* The selling spread to other technology issues, including Dow component IBM, which fell 3/8 to 53 5/8.
* Nasdaq market heavyweight Microsoft was off 2 3/8 to 81 1/8. Novell was the most active stock on Nasdaq after it reported disappointing earnings. The stock tumbled 3 5/8 to 19 7/8 on trading of more than 13 million shares.
* Another big loser was Dataware Technologies, which was nearly halved in value, falling 7 1/4 to 8 3/4. The company said it expected fourth-quarter earnings to be less than the Street anticipates.
* On the Big Board, Xerox jumped 3 1/8 to 89 1/2 in heavy trading as investors continued to act on the company’s announcement Wednesday that it will trim its work force as part of a plan to improve productivity.
* Paramount Communications jumped 2 3/4 to 82. Late in the day, the Delaware Supreme Court refused to overturn a lower court ruling that has blocked Paramount’s merger with Viacom. Viacom’s Class A shares were unchanged at 49 on the American Exchange; QVC lost 1 1/8 to 43 5/8 on the Nasdaq.
Financial markets overseas were mixed, offering no consistent pattern for U.S. stocks to follow.
In Mexico City, the Bolsa index turned lower as profit taking followed sharp gains made earlier this week, traders said. It fell 35.13 points to close at 2,398.14. Tokyo’s Nikkei-225 closed above 17,000 for the first time since Dec. 3. The 225-share average closed 553.96 points higher, at 17,061.91. In Frankfurt, the 30-share DAX average added 27.67 points to close at a new record high of 2,175.80.
Other Markets
Bond market investors initially focused on a 0.4% rise in the core rate of inflation--minus the volatile food and energy components.
The increase was slightly more than expected and made some bond investors sell, fearing a return to high inflation that would hurt the value of fixed-income securities.
But further analysis showed that most of the core rate’s increase resulted from a one-month, 2.1% spike in auto prices that isn’t expected to be repeated.
By day’s end, the price of the Treasury’s main 30-year bond yield fell to 6.15% from Wednesday’s 6.16%, pushing the price up 5/32 point, or $1.56 per $1,000 in face value. Yields and prices move in opposite directions.
Meanwhile, in other markets: * Gold for current delivery settled at $382.60 an ounce, off $1.20, on the New York Comex. Silver for current delivery was quoted at $4.96 an ounce, down 1.5 cents.
* The dollar settled mostly mixed in thin trading on world currency markets.
Market Roundup, D6
