Market Wrap: Stocks Lower On Inflation Fears

Technology and industrial stocks declined today after a record U.S. trade deficit and a weak dollar made investors concerned about looming inflation.

The Dow Jones industrial average lost 27.54 points to close at 10,963.84, while the technology-laden Nasdaq composite dipped 36.30, or 1.4%, to 2,621.43. The S&P 500 index was down 9.25 to 1,323.59. The benchmark 30-year Treasury bond declined 7/16 in price, raising the yield to 6.03%, after the U.S. trade deficit rose to a record $24.6 billion.

At the same time, the dollar slid to a seven-month low against the Japanese yen. A larger trade deficit and a weak dollar are considered to be inflationary. On Aug. 24, the Federal Reserve Board's monetary policy committee is expected to increase short-term rates by a quarter of a percentage point.

Sharp declines among Internet stocks punctuated what was an otherwise quiet day of trading in technology shares. Yahoo (YHOO) dropped 5-7/8 to 139-3/16; eBay (EBAY), 12-3/16 to 113-3/4; and America Online (AOL), 3-5/16 to 95-7/8.

Computer hardware stocks were moderately lower, after a strong showing yesterday by direct sellers Dell (DELL) and Gateway (GTW). Today, Dell declined 11/16 to 43-7/8; Gateway, 1-3/4 to 89-1/4; IBM (IBM), 1 to 122-7/8; and Hewlett-Packard (HWP), 1/8 to 102-1/4. Compaq (CPQ) bucked the trend by rising 1/2 to 24.

Stocks of semiconductor equipment makers stabilized after yesterday's steep decline. Applied Materials Inc. (AMAT) rose 1/4 to 65-5/16, and Novellus Systems (NVLS) added 15/16 to end at 57-7/16. LAM Research (LRCX) dipped 7/16 to 50-1/8, and Teradyne (TER) slipped 11/16 to 65-5/16.

Shares of the chipmakers themselves declined moderately, with Intel (INTC) slipping 1-3/16 to 77 5/16 and Advanced Micro Devices dropping 7/16 to 18-1/8.

Networking stocks declined along with the broader market, with Cisco Systems (CSCO) falling 1-1/16 to 62-1/4; Lucent (LU), 3/8 to 63-13/16; 3Com (COMS), 3/4 to 23-3/8; and Cabletron Systems, (CS) 1/8 to 13-13/16.

Enterprise resource planning companies were mixed, with SAP (SAP) dropping 1/8 to 32-9/16, PeopleSoft (PSFT) rising 1/4 to 14-1/4, J.D. Edwards (JDEC) slipping 1/8 to 14-7/8, and Oracle (ORCL) rising 9/16 to 36.