Stocks Slip on Fresh Sell-Off of Tech Issues

Stocks slid Wednesday, led by technology shares, amid rising investor jitters over interest rates.

The Dow Jones industrial average closed off 45.79 points at 7,039.37, after being down more than 70 points earlier in the session.

The drop ended a string of two record closing highs of 7,085.16 on Tuesday and 7,079.39 on Monday.

In the broad market, losers beat winners by 16 to 10 on the New York Stock Exchange and by 25 to 16 on Nasdaq.

The decline shaved 0.9% from the Standard & Poor’s 500 index and 1% from the technology-laden Nasdaq composite index.

Broader indexes had posted fairly modest losses until interest rates started rising in the bond market at midafternoon.

Bonds had traded nearly unchanged most of the day until the Federal Reserve Board released its “beige book” report on regional economic conditions. The report showed that the economy’s surprising vigor has continued to create jobs but that the resulting competition for workers hasn’t led to pronounced wage increases--a key force behind inflation.

The news initially sent bond yields lower. But some traders then sold into the strength, trying to insulate themselves from potential jolts in today’s report on retail sales activity and Friday’s reading on February wholesale inflation.

The bellwether 30-year Treasury bond yield ended at 6.88%, up from 6.85% on Tuesday.

The beige book will serve as the basis for a Fed meeting later this month on the central bank’s interest rate strategy. The Fed took no action at the last policy meeting in late January, but with economic readings regularly coming in stronger than expected, many investors are concerned the central bank is poised to raise interest rates for the first time in two years.

“A portion of the Street now believes that the economy is strong enough to warrant some restraints by the Fed,” said Larry Wachtel, a market analyst at Prudential Securities.

Higher interest rates would impede borrowing and spending, helping ease inflationary pressures, but also could hurt stocks by slowing company revenues and raising corporate operating costs.

Wednesday’s announcement of changes in the Dow industrial index had no effect on the market; the news was reported after the market closed.

Among Wednesday’s highlights:

* Profit taking hit some of the Dow’s highest fliers, including Disney, down 1 3/4 to 75 3/8; Philip Morris, down 1 5/8 to 138; Merck, down 1 5/8 to 92 1/4; and Procter & Gamble, down 1 1/2 to 125 1/2.

The Dow’s two biggest gainers, by contrast, were retailers, which have been rising in recent weeks on signs of healthy consumer spending. Sears rose 1 1/8 to 56 5/8 and Woolworth rose 5/8 to 23.

Also, Wal-Mart Stores, which joins the Dow next week, rose 3/4 to 28 1/2, Gap climbed 1 to 34 7/8 and TJX rose 1 3/8 to 46 3/4.

* Some industrial names also gained on optimism about the economy. Black & Decker jumped 2 3/8 to 33 3/8 and Whirlpool added 1 1/8 to 50 3/4.

* Dragging down Nasdaq were such tech stocks as Cisco Systems, down 1 7/8 to 50 7/8; Intel, off 1 1/8 to 142 3/4; Sun Microsystems, off 2 to 29 3/4; and Oracle, down 1 5/8 to 34 1/8.

Investors have been dumping many tech shares on concerns about future earnings growth.

In contrast Wednesday, several disk drive makers gained on optimism about 1997 sales trends. They were led by Western Digital, up 6 1/4 to 64 1/2.

* On the downside, Southland firm Access Health tumbled 8 1/8 to 14 3/8 after saying it expects lower fiscal 1997 earnings and revenue.

Overseas, Tokyo’s Nikkei stock average fell 0.5%, Frankfurt’s DAX index fell 1.3% and London’s FTSE-100 fell 0.5%.