Tech Shares Slump, but Dow Edges Higher

Technology shares slid again Tuesday on fresh worries about computer industry profits, but a late surge trimmed most losses in other sectors.

The Dow Jones industrial average rose 1.48 points to 5,719.27, rebounding in the last half an hour from an 18-point deficit. The tiny gain in the index nevertheless made for its fifth straight advance, for a total of about 91 points.

But the Nasdaq composite index, heavy with tech shares, fell 10.32 points to 1,172.58.

Analysts said the recent trend in the market continued, with investors taking profits in smaller Nasdaq stocks in general and heading into “safer” blue chips.

Such activity often dominates at the end of quarters; it is termed “window-dressing,” meaning that some money managers are shifting their portfolios to look good in end-of-quarter statements to clients.

“We’ve got three more days of potential window dressing,” said Ricky Harrington, senior vice president and technical analyst at Interstate-Johnson Lane in Charlotte, N.C. “Funds are staying with big blue chips and ridding their portfolios of losing stocks, so those are under more pressure.”

Declining issues outnumbered advances by a 6-5 margin on the New York Stock Exchange, where volume picked up to 392 million shares.

In the Nasdaq market, losers topped winners 23 to 15.

Technology shares were battered again, dragging down the struggling Nasdaq and American stock markets, as worries continued about the profit outlook for the computer sector.

Several large and small companies in computer-related businesses have issued cautious outlooks this month, ending what had been a powerful rally in the sector. Tuesday’s technology slide was led by 3Com, a leading maker of computer networking equipment, which reported a profit that only met analysts’ expectations.

In active Nasdaq trading, 3Com fell 4 13/16 to 45 13/16.

Other tech losers included Sun Microsystems, down 2 1/4 to 57 1/8; Dell Computer, off 2 1/2 to 50 5/8; and Microsoft, off 2 1/8 to 122.

On the economic front, a Realtors group reported that despite rising mortgage rates, sales of existing homes rose 1.4% in May, tying a record set more than two years ago.

Many economists had expected the buying to slow. But the bond market, sensitive to signs of stronger growth, rallied modestly despite the housing report.

A separate report issued Tuesday indicates that consumer confidence in June tumbled to its lowest level in five months, suggesting the economy could start to slow in coming months. That apparently helped bonds, pushing the 30-year Treasury bond yield to 7.04% from 7.08% on Monday.

Analysts remain divided as to whether the Federal Reserve Board’s policy meeting next week will produce an increase in the central bank’s short-term lending rates, which could slow the economy.

Among Tuesday’s highlights:

* Much of the buying in stocks was in so-called defensive stocks, including shares in companies whose sales and earnings are not much affected by an economic slowdown. Pfizer rose 1 to 74, Campbell Soup added 1 1/2 to 68 5/8, Procter & Gamble gained 2 to 93 1/2 and Chase Manhattan tacked on 1 3/8 to 70 1/8.

* Chrysler lost 2 5/8 to 63 5/8, Ford dropped 5/8 to 32 3/4 and General Motors fell 1 1/4 to 53 1/8 after a Bear Stearns analyst initiated coverage of the auto makers with an unattractive rating.

* ITT rose 2 to 64 after Salomon Bros. issued a strong recommendation to buy the company’s stock.

* OrthoLogic tumbled 8 5/8 to 20 7/8 on news that a suit seeking class-action status had been filed in Arizona Superior Court alleging the company issued false statements to inflate its stock price. The company said the suit has no merit.

In commodities trading, cotton futures prices fell at the New York Cotton Exchange in reaction to a government report showing three months of drought failed to seriously damage the Texas crop.

Selling related to beliefs that scandal-plagued Sumitomo Corp. will liquidate its copper holdings hit world copper markets again, with copper prices falling to 2 1/2-year lows on heavy selling.

Market Roundup, D7