Blue Chips Rise as Bonds Rally; Nasdaq Declines

Computerized buy programs helped boost the blue-chip Dow industrial average late Wednesday as bond yields fell, but the broad market remained weak.

The Dow, which had been down nearly 50 points at midday, ended up 21.79 points at 5,603.65.

But losers still topped winners by 14 to 10 on the New York Stock Exchange and by 26 to 13 on Nasdaq, in brisk trading.

The Nasdaq composite index of mostly smaller stocks lost 12.40 points to 1,141.19. The index now is off 8.6% from its June peak.

Analysts said the market pattern continued to suggest that many investors are growing nervous and are selling smaller stocks in favor of well-known blue-chip names that are perceived to be “safer.”

The stock market overall was hurt Wednesday by Motorola’s shockingly bad second-quarter earnings report, released after trading ended Tuesday.

Motorola shares plunged 8 5/8 to 57 7/8 and dragged other technology stocks down as well, as investors worried that the weakness in Motorola’s semiconductor and cellular phone businesses hinted at deeper problems for many of its competitors as well.

What’s more, after trading Wednesday, tech giant Hewlett-Packard warned that it has seen a sudden slowdown in orders in recent weeks, and that analysts’ current quarterly earnings estimates for the company “could be a stretch.”

“We don’t know yet whether the forces that are affecting our order growth represent a fundamental shift in the business climate or more seasonal, transitory fluctuations in demand,” HP chairman and chief executive officer Lewis Platt said in a statement.

H-P’s shares, which had gained 1 7/8 to 89 in regular trading, plunged to about 86 in after-hours trading.

Analysts said the growing concern over corporate earnings may well force stock prices down in the near term. Even a strong bond market rally on Wednesday couldn’t help the broad market.

The 30-year Treasury bond yield dropped to 7.07% from 7.12% on Tuesday, and shorter-term yields also dove, after the Wall Street Journal disclosed that a Federal Reserve Board study hinted that the central bank may not be in a hurry to tighten credit, despite recent signs of rising inflation.

The Fed said the report did not represent official policy, but some bond traders wondered if the Journal story was essentially a “plant” by Fed officials to allay bond market concerns about an imminent official hike in interest rates.

Among Wednesday’s highlights:

* Tech shares leading the market lower included Nokia, down 1 5/8 to 36 1/2; LM Ericsson, off 1 3/16 to 20 9/16; Yahoo, down 2 1/8 to 16 3/8; Newbridge Networks, down 1 5/8 to 60 1/4; and Intel, off 1/2 to 72 7/8.

But computer networker Ascend Communications jumped 3 3/4 to 60 2/3 after the company reported a fourfold increase in second-quarter earnings because of strong international and Internet-related equipment sales.

* Entertainment stocks also were weak. Viacom class A sank 1 to 34 3/4. Time Warner lost 5/8 to 37 3/8 and Turner Broadcasting class A dropped 7/8 to 26 on reports that the Federal Trade Commission staffers are recommending blocking the companies’ merger.

* Some classic consumer growth stocks continue to gain as investors sought safer issues. Clorox rose 1 3/8 to 91 3/8, Coca-Cola added 1/2 to 48 and Gillette rose 3/8 to 60 1/2.

But Procter & Gamble, which added 1/4 to 88 1/2, warned late in the day that earnings growth may slow in the near term, though the company expects it to pick up again later this year.

In commodities trading, cotton futures fell after rain drenched farmlands in West Texas, where dry conditions were threatening to cut the size of this year’s crop.

In foreign trading, Mexico City’s Bolsa stock index closed slightly higher, shadowing the seesaw journey of the Dow average.

Market Roundup, D6