Technology stocks continue to slide


NEW YORK -- U.S. stocks closed mixed yesterday as a rally in paper, steel and companies that will benefit from a robust economy was overshadowed by a second day's decline in technology issues.

Stocks of so-called cyclical companies climbed for a second day as investors foresaw a longer economic expansion, a view that was brightened by Germany's first interest-rate cut in 10 months.

"What's starting to happen is a sense of economic longevity is finally coming in to play in the marketplace," said Phillip Schettewi, chief portfolio strategist at Loomis Sayles' Washington office.

"The Federal Reserve has probably engineered a pretty smooth [economic] path, and the path probably lasts another two to three years. And if you have a clear path in terms of positive growth, you want to continue to play companies that are sensitive" to a growing economy, he said.

The gains in the cyclicals helped the Dow Jones industrial average reach its 10th record high this month, breaking Wednesday's mark. The Dow industrials rose 11.76, to 4,172.56, boosted by higher prices for Caterpillar Inc., Aluminum Co. of America and DuPont Co., companies that stand to benefit most from a longer economic recovery, investors said.

The Standard & Poor's 500 stock index dropped 0.90, to 502.22, its second straight decline, as drug, semiconductor, soft drink, telephone and software shares declined.

The number of advancing common stocks on the New York Stock Exchange outpaced losers by almost 13-to-8. Volume rose to 363 million.

Loaded with technology stocks, the Nasdaq composite index slipped for a second day, falling 2.30, to 816.86. Intel Corp., Novell Inc., Oracle Systems Corp., Cisco Systems Inc. and Applied Materials Inc. all weakened.

The Russell 2000 index of small-company stocks rose 0.38, to 260.28, and the Wilshire 5,000 index eased 1.17, to 4,933.12.

Sliding technology shares -- among the market leaders until now -- dampened investor sentiment toward the broader market, traders said.

Tech stocks started short-circuiting Wednesday, when investors decided to reap the benefits of a three-month rise in the price of many companies. "The technology sell-off yesterday indicated an extreme nervousness" about demand and earnings for semiconductor, software and computer makers, "and that fed on itself," said Timothy Straus, manager of institutional sales at Hancock Institutional Equity Services in Boston.

International Business Machines Corp. fell 62.5 cents yesterday, to $82.375; Hewlett-Packard Co. dropped $2.125, to $119.125; Texas Instruments Inc. was off $4, at $90.25; Intel Corp. fell $1.6875, to $85.375; and Micron Technology Inc. slid $4, to $74.50.

With Germany lowering interest rates for the first time since May 1994, easing pressure on the Federal Reserve, "happy days may be here again," said Anthony Hitschler, president of Brandywine Asset Management Inc. of Wilmington, Del.

Reflecting the newfound enthusiasm for cyclical stocks, Morgan Stanley's index of 30 such stocks gained 3.38, to 309.04, while its index of 30 consumer goods stocks lost 1.58, to 231.35.

"Maybe we're going to finesse our way to a lower level, but a sustainable period, of economic growth for a while," Mr. Hitschler said. "And if that's the case, money is going to flow back into cyclicals."

Steel stocks also rallied amid optimism about rising demand and robust earnings.

Bethlehem Steel Corp. advanced 75 cents, to $16.375; Inland Steel Industries Inc. rose $1.875, to $28.25; Lukens Inc. surged $2.25, to $29.50; Nucor Corp. rose $2, to $55; and Carpenter Technology Corp. added $2, to $57.75.

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