Tech Issues Lead Broad Decline Before Key Data

Computer-related shares tripped again Wednesday as profit worries intensified, weighing down the stock market as investors braced for new clues on inflation in Friday’s key employment report.

The Dow Jones industrial average fell 42.49 points to 7,269.66. Broader indicators also retreated as interest rates edged higher in the bond market.

Big-name technology shares, besieged by a series of disheartening profit forecasts that began with Friday’s warning from Intel, started the day higher. But the group faltered amid rumors that Gateway 2000 is set to warn that business has been slow this quarter. The computer maker is scheduled to make a presentation to securities analysts today. Gateway fell 1/4 to 61 3/4.

The broad market, meanwhile, slid into the holding pattern that often precedes the government’s monthly reading on payroll and wage levels--a major indicator of inflation trends.

“You’ve got the jobs data on Friday and the most popular sector being hit, so you have general nervousness,” said Larry Rice, chief investment officer at Josephthal, Lyon & Ross. “The big stocks are selling pretty near historic valuations. So nobody wants to make a major commitment ahead of these economic numbers.”

There was limited reaction to news that factory orders rebounded a bigger-than-expected 1.2% in April. The data compounded concerns over a report two days earlier showing that manufacturing activity was surprisingly robust last month.

Investors have been counting on a moderating trend in the economy to temper inflationary pressures and keep the Federal Reserve Board from slowing things down with another increase in the central bank’s lending rates.

The Fed has been concerned that continuing strength in the job market will force companies to boost wages--and prices--as they compete for workers to keep pace with demand.

Fed officials moved to slow spending in late March by raising a short-term lending rate, but they took no action at a strategy meeting last month, cheering investors worried about company profits. The Fed’s next meeting is July 1.

Declining issues outnumbered advances by a 7-6 margin on the New York Stock Exchange, where volume was a modest 466.71 million shares, down from 526.62 million in the previous session.

Among Wednesday’s highlights:

* Financial stocks, which are sensitive to the inflation and interest rate outlook, slipped for the second straight day. American Express fell 1 1/4 to 68 1/2 and J.P. Morgan fell 7/8 to 108 to weigh down the Dow.

* PepsiCo became the latest in a string of companies to warn of disappointing earnings, and its stock fell 2 3/8 to 35 7/8. It was the second-most active issue on the NYSE, with more than 8.6 million shares changing hands.

* H.F. Ahmanson rose 1 1/4 to 41 1/2 after the company dropped its hostile takeover bid for Great Western Financial. The move clears the way for Great Western’s planned merger with Washington Mutual.

Shares in Great Western gained 1 3/8 to 48 3/4. Western Mutual rose 1 1/16 to 54 13/16.

Overseas, Tokyo’s Nikkei stock average rose 0.2%, Frankfurt’s DAX index rose 1.0% and London’s FTSE-100 edged lower.

Coffee prices fell after Colombia said it would soon supply more coffee to world markets, while soybean prices dropped on news that Brazilian beans were being imported into the U.S.

At the Coffee, Sugar and Cocoa Exchange in New York, coffee for July delivery closed 12.65 cents a pound lower at 251.55 cents.

Colombian Finance Minister Jose Antonio Ocampo said in a statement issued late Tuesday that Colombia had opened “unlimited” export registrations for July-August shipment and expected to ship 2.5 million 132-pound bags during the period, welcome news for roasters now scrambling for beans.