FINANCIAL MARKETS : Stocks Blow Early Gain; Yields Fall

The stock market surrendered a big morning gain to close mixed Wednesday, as sinking technology stocks overshadowed falling bond yields and a stronger dollar.

The Dow Jones industrial average, which had soared 54 points in the first 30 minutes of trading, closed with a loss of 10.22 points at 4,690.15.

Although rising stocks still outnumbered losers by 13 to 10 on the New York Stock Exchange, the Dow now has fallen for four consecutive sessions, the longest losing streak since January.

Wednesday’s wild intra-day swing worried some analysts, who say it is a sign that the market’s spectacular rally this year is running out of steam.

“What they’re trying to do is use rallies to take profits,” said Leon Brand, global market specialist at NatWest Securities. “As fast as everybody wanted to get in, people are wanting to get out.”

Stocks got an early lift as a surging dollar sparked a rally in the bond market.

Overnight, the Japanese government announced new steps to encourage Japanese investors to buy foreign securities in the hope of further weakening the mighty yen.

U.S. bond traders, sensing that the Japanese measures could mean heavy new demand for Treasury securities, bought bonds aggressively.

The yield on the 30-year T-bond fell to 6.83% at midday from 6.90% on Tuesday, though it closed slightly above its lows, at 6.85%.

Bonds rallied despite a report of stronger-than-expected new-home sales in June and despite the Treasury’s announcement that it will sell a record $42.5 billion in new 3-, 10- and 30-year securities next week, more than the $41 billion that had been expected.

The Japanese measures are “definitely bullish” for U.S. bonds, said Scott Grannis, economist at Western Asset Management in Pasadena. “People will re-evaluate U.S. bonds and look at them more favorably.”

But as trading progressed Wednesday, the stock market focused more on another selloff in technology stocks than on lower bond yields.

Key tech stocks have been falling for four days, the second round of profit taking in two weeks.

Technology shares rose along with rest of the market early in the day, then fell after CNBC-TV correspondent Dan Dorfman quoted an analyst who said formerly red-hot tech stocks could decline 20% to 30% in the next three months.

Computer-guided “sell” programs also drove the market down, traders said. “There were two panics: a buying panic in the morning and a selling panic in the afternoon,” said Marty Kearney, a trader at PTI Securities.

Some analysts also noted that a stronger dollar, while positive for the bond market, might not be viewed the same by stock investors. The weak dollar has helped boost overseas profits of U.S. multinational firms over the past few years. Strength in the dollar could reverse some of those gains.

The dollar jumped to 90.95 yen in New York from 88.05 on Tuesday, and to 1.398 German marks from 1.376.

Among Wednesday’s highlights:

* Tech stocks leading the market lower included Micron Technology, down 2 1/2 to 57 3/4; Intel, off 1 3/4 to 61 1/2; Adobe, down 2 1/8 to 58 5/8; IBM,

off 2 1/8 to 107 1/2; Texas Instruments,

down 7 1/2 to 143 3/4, and Computer Associates, which lost 2 1/4 to 74.

On the plus side, Digital Equipment jumped 2 3/4 to 43 1/8 after it and Microsoft announced a partnership to develop and market software and computers based on Microsoft’s Windows NT operating system. Microsoft eased 1/2 to 89.

Also, software firm Sybase jumped 3 1/4 to 36 1/2. The stock had been halted on Nasdaq after someone impersonating Sybase’s chief financial officer called Nasdaq and asked for a trading halt, which some traders thought meant a takeover bid was coming. Nasdaq and Sybase said the call was a hoax, and trading resumed.

* Airline stocks were sharply lower after analysts at Salomon Bros. and Lehman Bros. cut ratings on some of the stocks, citing concerns about new fare wars.

UAL, parent of United Airlines, sank 4 3/8 to 144 1/8, American Airlines’ parent AMR fell 3 1/8 to 71 5/8, Delta slumped 4 1/2 to 74 3/8 and Southwest lost 7/8 to 27 7/8.

The Dow transportation average skidded 28.18 points, or 1.5%, to 1,855.58.

* Media stocks were mixed in the wake of takeover bids for Capital Cities/ABC and CBS this week. Disney, which is buying Cap Cities, eased 7/8 to 60 5/8 and Westinghouse, which is buying CBS, lost 1/2 to 14 1/4.

But Time Warner gained 1 to 44 3/8, News Corp. rose 7/8 to 24 1/2 and Seagram added 5/8 to 36 3/4.

* Most regional phone stocks rallied on hopes that the House this week will pass a telecommunications deregulation bill.

SBC Communications, parent of Southwestern Bell, jumped 1 5/8 to 49, Bell Atlantic gained 1 7/8 to 58 1/2, Pacific Telesis added 3/4 to 28 5/8 and Nynex surged 1 5/8 to 42.

* Many insurance stocks rose. Cigna posted a 58% increase in second-quarter earnings and soared 8 1/4 to 89 1/4. Other winners included Aetna, up 1 5/8 to 63 1/4, and CNA, up 3 3/4 to 93 1/4.

* Among new stock issues Pure Software saw spectacular demand as it issued 2.75 million shares at 17. The stock finished at 29 3/4 on Nasdaq. The company makes software that removes bugs from complex computer programs.

In foreign trading, European stock indexes were higher on speculation that Japanese investment in Europe may rise. London’s FTSE-100 index surged 50.0 points to 3,499.9, and Paris’ CAC index leaped 42.22 points to 1,960.03.

In commodities trading, beneficial rains in the U.S. corn belt and reluctance of foreign wheat customers to chase soaring U.S. prices sparked a massive selloff in grain markets Wednesday as speculators took profits, analysts said.

Wheat futures in Chicago, Kansas City and Minneapolis dropped their daily limits and rice, soybeans, cotton and orange juice markets fell sharply. Wheat prices had hit 15-year highs for the U.S. harvest period last month.