NEW YORK -- U.S. stocks slumped nearly 16 points yesterday, led by declines in drug and semiconductor issues.
"Drug stocks were pasted and so was the semiconductor group," said Edward Laux, head trader at Kidder, Peabody & Co.
The Dow Jones industrial average fell 16.21, to 3426.74, as 21 of the index's 30 components declined. Declining common stocks outnumbered advancing issues by an 11-to-7 ratio on the New York Stock Exchange.
Standard & Poor's 500 Index fell 3.06, to 448.31, while the Nasdaq Combined Composite Index declined 1.2 percent, or 8.07, to 687.40. The American Stock Exchange Market Value Index lost 2.60 to 420.48.
Drug stocks plunged on pessimistic earnings forecasts from Eli Lilly & Co. and Marion Merrell Dow Inc. The group also was hurt by a report published in the Washington Post that outlined specific cost-cutting plans under review by the Clinton administration. The program includes a freeze on prices charged by all private and public hospitals, doctors' laboratories, equipment makers and nursing homes.
Merck fell $1.125, to $36.625; Pfizer Inc. dropped $1.625, to $58.375; Johnson & Johnson declined $1.625, to $40.375, and American Home Products Corp. fell $1.25, to $62.125.
Leading semiconductor manufacturers also slumped. The group fell after the Commerce Department decided not to put heavy tariffs on imports of South Korean computer chips. The decision could lead to lower chip prices in the United States, a negative for companies like Intel Corp., Texas Instruments Inc. and Micron Technology Inc.
Intel declined $5, to $114.75; Texas Instruments fell $2.75, to $59.625, and Micron slumped $4, to $23.875.
Trading was moderate, with about 240 million shares changing hands on the NYSE.
Beside declines in drug and semiconductor issues, U.S. stocks were negatively affected by the Labor Department's report that said consumer prices, excluding volatile food and energy prices, rose 0.5 percent in February. The report prompted Federal Reserve Chairman Alan Greenspan to say inflation is "getting off to a less than auspicious start" in 1993.
"It's not going to be runaway inflation, but it's clear inflation is coming back," said John Brooks, director of sales and marketing at Notley Group.
"It's too early to be overly concerned about inflation, but the market is still going to have a tough time for the next few days," said Don Hays, investment strategist at Wheat First Butcher & Singer.
Inflation hurts the stock market because rising consumer and producer prices usually cause interest rates to rise.
Treasury bond yields have risen in five of the past seven days on concern about inflation. Treasury bonds rebounded yesterday, as the benchmark 30-year Treasury bond was up 1/4 -point, to yield 6.85 percent.
Wang Laboratories Inc., Amgen Inc., Intel, Merck and Glaxo Holdings PLC were the five most actively traded issues on the U.S. Composite.
Dow Chemical Co. fell $1.75, to $52. The giant chemical company was removed from the "buy" lists at Smith Barney, Harris Upham & Co. and Salomon Bros. on earnings concern.
NationsBank Corp. declined $1.25, to $55. The nation's fourth-largest banking company announced the acquisition of Chicago Research & Trading Group Ltd., an options trader and a large trader in government securities.
Exel Ltd., the property and casualty insurer, rose $1.625, to $47.375. The company said first-quarter net income rose to $1.61 a share from $1.25 in the year-ago period.
Merry-Go-Round Enterprises Inc. surged $2.25, to $17. The retailer plans to acquire Melville Corp.'s Chess King division, a retailer of men's clothing, in its latest expansion effort.
CPC International Inc. plunged $3.625, to $45.625. The maker of Hellman's mayonnaise, Skippy peanut butter and other foods said earnings growth is slowing because of weakening economic conditions in France, Italy and Spain.