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Dow industrials gain 9.68 points as bonds surge

NEW YORK — NEW YORK -- U.S. bonds surged and yields fell to the lowest in more than 15 months amid optimism the economy is slowing enough to tame inflation, but stocks closed mixed on concern that a weaker economy will crimp company profits.

The benchmark 30-year bond rose 1 7/32 points, or $12.19 per $1,000 bond, driving its yield down nine basis points to 6.66 percent, the lowest since Feb. 28, 1994. The two-year note's yield dropped 12 basis points, to 5.84 percent.

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"Long-term yields are very attractive at these levels, given our outlook for inflation," said Scott F. Grannis, a director at Western Asset Management Co. in Pasadena, Calif.

Inflation, which erodes the value of fixed-income securities such as bonds, probably won't accelerate this year because of ebbing economic growth, Mr. Grannis said.

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Gains in bonds were accompanied by strength in utility stocks and consumer products companies like Philip Morris Cos. and PepsiCo Inc., but investors fled technology shares after a report that semiconductor-equipment orders are slowing.

The Dow Jones industrial average rose 9.68, to 4,378.68, recouping a fraction of the 69.16 points it shed in the previous two days' retreat, but the technology-laden Nasdaq composite index lost 13.17, to 858.70. It was the biggest one-day drop for the Nasdaq index since it plummeted 15.15 points on Dec. 8, 1994.

The Standard & Poor's 500 index fell 0.07 to 523.58, its third straight decline.

Stocks fell after the Conference Board reported its index of consumer confidence declined more than economists had expected, to 101.6 in May from 104.6 in April, the first drop in three months.

The confidence report was the latest in a stream of reports that provided more evidence of a slowing economy. Those included a drop in April factory orders for big-ticket items like refrigerators, rising unemployment claims, dwindling home resales, and reduced projections for 1995 U.S. vehicle sales.

Technology shares paced the decline. Yesterday's fall was driven by the perception that technology companies' earnings will suffer if consumers and corporations curtail their shopping spree on computers and software, traders said.

Also buffeting chip shares was a report released late Friday showing orders for semiconductor-manufacturing equipment fell for the second month in April.

Intel Corp. declined $5.375, to $110.50; Microsoft was off $4.50, to $83; and Compaq Computer Corp. dropped $2.125, to $38.125; IBM Corp. fell $2.50, to $92.50; Dell Computer Corp. slid $3, to $49; Sun Microsystems Inc. fell $3, to $44.125; and Hewlett-Packard Co. declined $2.25, to $64.625. A host of other technology shares also fell.

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The Russell 2,000 index eased 1.42, to 269.15; the S&P; MidCap 400 index dropped 1.17, to 188.38; the Wilshire 5,000 index fell 9.16, to 5,120.20; and the American Stock Exchange market value index rose 0.59, to 491.33.

Utilities, tobacco and beverage shares, perceived as shelters during economic slowdowns, rose. These shares also lagged technology shares during the market's six-month rally, making them better bargains, traders said.

The Dow Jones utilities average rallied 2.63, to 203.66, its highest level in 14 months.

Texas Utilities rose 50 cents, to $35.375; PepsiCo rose 87.5 cents, to $47.375; Coca-Cola climbed 50 cents, to $60.125; and Philip Morris rose $1.125, to $71, recouping losses made Friday when the company recalled cigarettes for filter contamination.


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