NEW YORK -- U.S. stocks declined yesterday as falling semiconductor orders hurt technology issues and a key inflation report failed to ease concern about the course of interest rates.
"There's a large amount of caution on the part of investors who are concerned that bond market yields will rise back up again. That's at the heart" of yesterday's decline, said James Walline, vice president for equities at the Lutheran Brotherhood in Minneapolis, which manages $12 billion in assets.
Meanwhile, a monthly report by a semiconductor industry group showed chip makers getting $99 in new orders for every $100 in shipments in November, the third straight month of flat orders. "Anything under [$100] is crummy," raises concern about the industry's growth and "puts a little crimp" in the broader market, said Dan Marciano, senior vice president for equity trading at Dillon, Read & Co.
The Dow Jones industrial average snapped two straight days of record highs, falling 4.75, to 3,729.78, after gaining as much as 14.25 earlier in the day. Aluminum Co. of America, International Paper Co. and J.P. Morgan & Co. led the decline.
Among broader market indexes, the Nasdaq Combined Composite Index fell for a fourth straight day, dropping 6.41, to 761.48. Novell Inc., Microsoft Corp., Intel Corp., Oracle Systems Corp. and Apple Computer Inc. were the hardest-hit stocks.
The Standard & Poor's 500 Index sank for a second day, falling 2.11, to 464.18, led by drug, semiconductor, software, telephone and bank stocks.
Both the Nasdaq Composite and the S&P; 500 last reached record highs Oct. 15.
More than 11 stocks declined for every seven that rose on the New York Stock Exchange. Volume fell to about 287 million shares, from 314 million Wednesday.
Investors showed uneasiness about inflation even though a report from the Labor Department yesterday showed producer prices were unchanged in November and rose 0.4 percent from October, excluding food and energy prices, said Michael Metz, chief market strategist at Oppenheimer & Co.
"There's an inflation scare developing in the marketplace right now, and it's going to have a negative impact" on stocks, Mr. Metz said.
The Standard & Poor's index of metal stocks fell yesterday after climbing to a nine-month high Wednesday.
In reaction to the producer price report, long-term interest rates, reflected in yields on the benchmark 30-year Treasury bond, eased to 6.15 percent from 6.16 percent Wednesday.
Today, the consumer price report will be released; forecasts are for a 0.2 percent increase both overall and excluding food and energy.
Among semiconductor stocks, Intel Corp. fell $1.50, to $58; Motorola Inc. dropped $3, to $91; Texas Instruments Inc. fell $3.125. to $60.375; LSI Logic Corp. dropped 75 cents, to $13.75; and Micron Technology Inc. fell 75 cents, to $47.625.
Novell Inc., a maker of computer networking software, slid $3.625, to $19.875, as lower fourth-quarter earnings and high receivables prompted analysts to reduce their ratings. Novell said quarterly net income fell 1 percent, to 22 cents a share.
Dataware Technologies Inc. collapsed $7.25, to $8.75. The software company said it expected fourth-quarter earnings per share to fall below analysts' estimates of 11 cents a share.
Not all technology stocks fell. Veritas Software Corp. rose $3.50, to $19.50, after it sold 1.175 million shares at $16 each in an initial public offering.
WMS Industries Inc. dropped $1.375, to $29.125. The Securities and Exchange Commission is investigating trading in Viacom Inc. before its proposed merger with Paramount Communications Inc., the Wall Street Journal reported. The investigation includes purchases made by Viacom Chairman Sumner Redstone and WMS Industries, in which Redstone holds a 24.9 percent stake.