Nasdaq Sets Record Again as Dow Falls

The Nasdaq stock market chugged to a new record for the fifth straight session Wednesday as the recent boom in technology and small-company issues made it the busiest day in Wall Street history.

The Dow Jones industrial average fell 34.69 points to close at 5,553.90 amid concerns that rising interest rates and inflation will impede earnings growth for big companies. The Dow was off more than 50 points earlier in the session before rebounding slightly.

Most broad-market measures fell too, but the technology-laden Nasdaq composite index surged another 10.07 points to 1,176.83 on record volume and now has risen more than 7% is less than two weeks. Nasdaq volume totaled 728.6 million shares, crushing the old mark of 650.1 million set Tuesday.

The combined trading volume of all U.S. stock markets totaled 1.3533 billion, surpassing the high of 1.3529 billion set Dec. 15.

Technology stocks have been riding a wave of surprisingly strong earnings reports over the last two weeks. On Wednesday, Compaq Computer became the latest industry bellwether to help dispel widespread fears of sluggish computer sales that swept the stock market earlier this year.

Compaq, the world’s leading personal computer maker, said its profit rose 8% and sales jumped 45% during the first quarter. Compaq shares jumped 3 1/8 to 47 on Wednesday, and investors quickly bid up other rival computer issues, such as Digital Equipment, Hewlett-Packard, Dell Computer and Gateway 2000.

Smaller-company stocks, which saw little improvement while the Dow surged earlier this year, also continued their sudden record-setting rise. The Russell 2,000 index of smaller companies set its fifth straight record and has now risen more than 4.5% in less than two weeks.

Analysts said smaller stocks are now in favor because their earnings growth is more likely to outpace bigger companies if the economy continues to improve.

Declining issues outnumbered advancers by a slim margin on the New York Stock Exchange, where volume totaled 493.34 million shares, well above Tuesday’s pace.

The NYSE’s composite index fell 0.64 points to 348.96, and the Standard & Poor’s 500-stock index fell 1.41 points to 650.17.

Analysts attributed some of the broad market’s decline to some poor earnings reports, continuing weakness in the bond market and the dollar’s renewed strength against other currencies, which hurts multinational companies that convert foreign revenue to dollars.

Bonds edged lower, with long-term interest rates climbing above 6.8%, after the Commerce Department reported that orders to U.S. factories for durable goods rose 1.4% in March, the first gain in three months. Although many analysts had expected little change in orders in March, they predict that demand will pick up moderately as the year progresses.

Strong economic readings often hurt bond prices, because traders are concerned that too much growth will cause inflation, which eats away at the value of fixed-income investments. Stocks often fall with bond prices because higher borrowing costs hurt corporate profits.

“The market is not as bad as it looks. The real weakness is in consumer nondurables,” said Michael Metz, market analyst for Oppenheimer & Co.

“If interest rates go up, valuations on these companies fall. And the rising dollar will hurt when companies translate overseas profits. That’s finally sinking in with investors,” he said.

Among Wednesday’s market highlights:

* Disney shares fell 1 1/8 to 60 5/8 a day after the company reported a first-quarter loss of $25 million, partly due to lower movie profit.

* Merck, another consumer-stock component of the Dow industrials, slid 1 3/8 to 60 3/8, as did other leading drug stocks.

* Cigna rose 4 3/8 to 112 1/8 after its board approved a $500-million stock repurchase plan.

* Digital Equipment rose 1 1/4 to 61 5/8, adding to Tuesday’s gain of 4 7/8 on higher quarterly earnings.

* Intel rose 2 9/64 to 70 1/4 after SoundView raised its opinion of the stock and boosted its 1996 earnings estimate.

* Glenayre Technologies jumped 7 7/8 to 45 on strong first-quarter sales and income.

Among initial public offerings, Outdoor Systems, an outdoor advertising company, jumped 6 to 21.

Overseas, Tokyo’s Nikkei stock average rose 0.7%, Frankfurt’s DAX index fell 0.5% and London’s FTSE-100 fell 0.4%.