FINANCIAL MARKETS : Stocks Dampened by Selloff in Tech Issues; Dow Off 11

A selloff in technology issues led the stock market broadly lower Thursday, its second decline after August’s powerful rally.

The Dow Jones industrial average eased just 11.98 points to 3,901.44, but broader indexes suffered much larger losses.

The Nasdaq composite index of mostly smaller stocks, heavy with tech issues, slumped 6.67 points, or nearly 0.9%, to 758.95.

On the New York Stock Exchange, losers topped winners by 13 to 8, though volume retreated to 283 million shares.

The market’s tone was set in the morning, as bond yields rose. The bond market was responding to a report from a nationwide manufacturing association, showing another increase in prices of raw materials in August--even as overall manufacturing activity cooled.

The report suggested rising inflationary pressures.

But bonds soon recouped their losses in listless activity, as traders positioned for today’s government report on August employment. The 30-year Treasury bond yield ended unchanged at 7.45%.

Stocks, however, continued to be pressured by the influence of slumping technology issues, after major personal computer maker AST Research shocked Wall Street by projecting a quarterly loss.

Among the market highlights:

* AST plunged 4 15/16 to 13 1/16, and PC makers and suppliers in general were off sharply.

Arnold Owen, managing director of trading at research firm SoundView, said analysts at his firm are concerned that a price war and diminishing orders will compress the margins for PC companies. Soundview downgraded Compaq and Microsoft, among others.

Compaq dived 2 1/4 to 35, Microsoft fell 2 to 56 1/8, Apple dropped 1 3/16 to 35, Dell Computer eased 1 to 31 1/2, National Semiconductor fell 1 1/4 to 17 3/8 and IBM lost 5/8 to 67 7/8.

But some traders also noted that tech stocks were overdue for profit taking after strong gains in August. “Some of these have gotten extended, and that’s the reason you’re seeing some of them getting hit so hard,” said Jonathan Dodd, analyst at Dean Witter.

* Profit taking also hit industrial issues. Dover dropped 1 1/4 to 56 5/8, Deere lost 1 3/4 to 72 1/2, Caterpillar fell 1 to 114 3/8, Nucor lost 3/4 to 68 1/4 and Alcoa slipped 1 to 83.

* Many food and drug issues also gave ground. CPC Intl. dropped 2 1/8 to 51 1/4, Hershey sank 1 1/8 to 46 7/8, Pfizer lost 3/4 to 67 1/2 and Warner Lambert slid 1 3/8 to 82 1/8.

* Retail stocks were mostly flat after reporting August sales, but disappointing reports sent Gap down 4 3/4 to 38 1/4 and Dayton Hudson down 3 5/8 to 81 1/8. Federated, however, soared 1 3/8 to 22 1/2 on its report.

* In the entertainment sector, CBS jumped 11 1/8 to 332 1/2 on new takeover rumors focusing again on Disney. Also, Casino Magic leaped 1 7/8 to 8 7/8 on rumors that Caesars World may make a bid.

* Electric utility stocks suffered a wallop on the heels of a disappointing rate case decision in New York. The Dow utility index tumbled 3.49 points to 185.67, as Con Ed dropped 1 to 26 1/4, Niagara Mohawk slumped 1 3/4 to 13 1/8 and Houston Industries lost 3/4 to 34.

Overseas, London’s FTSE-100 index fell 34.8 points to 3,216.5 amid speculation that the Bank of England will raise interest rates to cool the British economy. The market drew no strength from a jump in the pound’s value.

In Frankfurt, shares finished the day lower after the Bundesbank announced it was leaving interest rates unchanged. The DAX index lost 12.05 points to 2,200.80.

In Tokyo, the Nikkei average rose 14.40 points to 20,642.93. Mexico City’s Bolsa index slipped 9.12 points to 2,693.61.