Talk of Tech Trouble Saps Stocks; Bond Prices Climb

Stocks fell Wednesday amid warnings of disappointing profits by technology companies, while bond prices rose on fresh news that inflation remains under control.

The dollar rebounded from early selling sparked by news of a sharp gain in Japan’s trade surplus in May.

The Dow Jones industrial average ended down 42.07 points at 7,718.71, its third straight session of losses. In the broader market, declining issues narrowly outnumbered advances in moderate trading on the New York Stock Exchange.

Analysts said the Dow’s decline wasn’t surprising.

“The market, given the hellacious run that it has had, is susceptible to a little bit of a break,” said Charles White, portfolio manager at Avatar Associates in New York.

Stocks dipped despite data suggesting that the economy is losing steam and inflation remains under control. But the Federal Reserve Board’s “beige book” report buoyed bonds.

As bond prices rose, the yield on the benchmark 30-year Treasury bond fell from Tuesday’s 6.71% to 6.68%, the lowest since Feb. 25.

A separate government report Wednesday showed the productivity of American workers rose at the fastest rate since 1993 during the first three months of this year.

The Standard & Poor’s 500 list fell 5.36 points to close at 889.06, snapping an eight-session streak of record highs. The NYSE composite index was down 1.68 points at 463.41.

The Nasdaq composite index fell 10.68 points to 1,432.43, ending three consecutive sessions of record-breaking closes.

Warnings by personal computer manufacturer Gateway 2000 of lackluster second-quarter results and by computer disk drive maker Seagate Technology of disappointing quarterly revenue raised concerns that trouble might lie ahead for the technology sector.

The warnings sparked concern that the entire sector--which has run up during the last month--and possibly the broader market might suffer.

That volatility is expected to rise through the week as Friday’s “triple witching” expiration of options and futures nears.

Among Wednesday’s highlights:

* Leading Dow losers were Eastman Kodak, down 1 55/64 at 78 5/8, and Chevron, down 1 7/8 at 74 1/4.

American Express, up 1 1/2 at 77 7/8, led gainers following an analyst’s upgrade of the stock and continued speculation that it might be acquired by Citibank.

* Pacing the retreat among technology issues were Cisco Systems, down 1 3/4 at 67; Intel, down 3 1/8 at 146 9/16; and Microsoft, down 4 at 130 3/16.

Seagate fell 5 1/4 to 36 1/4, Compaq Computer slid 7/8 to 106 7/8, Texas Instruments dropped 3 3/8 to 86 1/4, Dell Computer fell 4 to 116 7/8 and Tellabs slumped 3 9/16 to 53. Gateway rose 1 3/4 to 32 after tumbling 3 7/16 on Tuesday.

Oracle fell 2 15/16 to 50 5/16 after reporting fiscal fourth-quarter earnings that met expectations.

* Energy issues dropped from all-time highs set earlier this week as crude prices declined. Exxon fell 1/4 to 63 3/8, Mobil declined 1 3/8 to 141 1/4 and Texaco was down 3/4 at 112 7/8.

* Other gainers included new stock offerings Boston Properties, up 1 3/4 at 26 3/4, and business training software developer Aris, up 4 1/8 at 19 1/8.

* Pep Boys rallied 2 1/2 to 33 3/8 after agreeing to supply auto parts and service to AutoNation USA, the used-car unit of Republic Industries, which rose 3 3/8 to 23 11/16.

Overseas, Tokyo’s Nikkei stock average closed down 0.5%. Frankfurt’s DAX slipped 0.3% and London’s FTSE-100 was down 0.5%.