TURMOIL ON WALL STREET : Dow Overcomes Early Drop as Techs Rally : Markets: Blue-chip index was off more than 60 points as trading began. Nasdaq composite also recovers. Bond prices fall.

Stocks rallied from a deep early selloff to post only modest losses in heavy trading Tuesday, as investors took advantage of the technology group’s recent drubbing to ferret out bargains.

The Dow Jones average of 30 industrial stocks opened with a plunge of more than 60 points but ended with a 5.42-point loss at 4,720.80. Support for the blue chips came partly from investors using cash from their widespread sale of technology shares in recent days, traders said.

But technology-laden indexes also rebounded from big setbacks early Tuesday, as investors decided that the group’s dramatic slide had largely played itself out and found many issues trading at attractive prices.

“I think you’ve seen most of the damage” in the technology shares, said Peter Canelo, chief market strategist of NatWest Securities in New York.

Bond prices also dipped as the credit markets reopened after the Columbus Day holiday Monday, and the dollar advanced against other major currencies.

The Nasdaq composite index erased a 25-point deficit to end down just 1.27 points at 983.47, and the American Stock Exchange’s computer index slipped 0.91 point to 226.42. The Philadelphia Stock Exchange’s semiconductor index rose 4.55 points to 242.06.

Still, losers overwhelmed gainers 7 to 4 on the New York Stock Exchange, as Big Board volume swelled to 412.6 million shares from 275.3 million on Monday, when many traders were absent because of the holiday.

Despite the market’s rebound, some technology stocks continued to be hammered because their companies either reported or forecast quarterly profits that were below what securities analysts had expected.

Motorola, for instance, saw $3 billion of its market value wiped out Tuesday, even though the electronics giant had reported a hefty 31% gain in third-quarter profit Monday. That was less than expected, however, and orders to sell Motorola were so heavy Tuesday that the stock’s opening was delayed for much of the morning. It eventually closed at 64, down 5.

Even though Wall Street has punished several other technology stocks for disappointing earnings, the response to Motorola’s performance struck some observers as extreme.

“I don’t think there’s anything wrong with Silicon Valley; the real problem is Wall Street” and its expectations of how fast technology companies can keep growing, Canelo said. “What’s happened here is you have had excessive [profit] expectations, and now they’re coming back to Earth.”

Nonetheless, the early pressure on Motorola helped get the overall market off to a lousy start. The Dow Jones industrials plunged more than 50 points only nine minutes after the opening bell, triggering the NYSE’s “circuit breakers” that limit computer-driven selling. Only once before had the limits kicked in so fast--on April 4, 1994.

Wall Street was also unsettled by the latest report from the Semiconductor Industry Assn., which reported Monday after trading closed that its book-to-bill ratio--a key measure of demand for computer chips--fell to 1.11 in September from 1.17 the previous month.

But by midafternoon, prices began recovering, and the circuit breakers were no longer needed.

“Investors took a step back” from their heavy selling of technology shares “and said, ‘Look, we’ve got to put this money to work . . . in other stocks,’ ” said Alan Skrainka, chief market strategist at Edward D. Jones & Co. in St. Louis.

Their solution, Skrainka said, was partly to buy stocks of companies that should prosper even in an economy that is growing more slowly, such as Gillette, which finished down 3/8 at 48 7/8, and Johnson & Johnson, off 1/2 at 76 1/8. Both remain near their 52-week highs, however.

Among Tuesday’s other highlights:

* Technology stocks bouncing back included Scientific-Atlanta, up 5/8 to 13 1/4; Texas Instruments, up 1 3/8 to 71 3/4, and LSI Logic, up 2 7/8 to 49 3/4. DSC Communications recovered 7/8 to 40 1/8.

* On the Big Board’s active list, Merck gained 1 1/4 to 59 3/4, Ford Motor shed 1/8 to 29 1/4, Wal-Mart Stores fell 1/4 to 23 7/8 and Pacific Telesis rose 1/4 to 30 3/8.

* Overseas, London’s FTSE-100 index fell 50.2 points to 3,460.1, and the DAX-30 index in Frankfurt dropped 20.41 points to 2,137.01. Tokyo markets were closed for a national holiday. In Mexico City, the 37-share Bolsa index rose 21.01 points to 2,337.78.

In the credit markets, meanwhile, prices of the Treasury’s benchmark 30-year bond fell 1/4 point, or $2.50 for every $1,000 in face value, which nudged its yield up to 6.44% from 6.42% late Friday.

The dollar rose to 100.70 Japanese yen in late New York trading from 100.48 yen on Monday, and it climbed to 1.4187 German marks from 1.4130.

Market Roundup, D6

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