Blue Chips Fall After 3-Day Rally

Blue-chip shares slipped Thursday after a three-day rally, but bargain hunters kept scouring the technology sector and other areas that haven’t recovered as fully from the market’s recent slide.

U.S. bonds rose, driving yields to the lowest level in seven weeks, amid optimism congressional leaders and President Clinton will strike an agreement to balance the federal budget.

The Dow Jones industrial average fell 32.51 points to 6,976.48 as investors secured some of this week’s gains before today’s employment report, the last of this week’s big economic readings.

Broader market measures were mixed, with technology and small-company shares boosting the Nasdaq market to its fourth straight gain.

The Dow, which slid by as much as 95 points before rebounding, had gained 270 points during the previous three sessions, moving above 7,000 on Wednesday for the first time since March 12.

“What we saw . . . was simply some profit-taking in the blue chips, which had run up nearly 10% from April’s lows,” said Eugene Peroni, director of technical research at Janney Montgomery Scott in Philadelphia.

“The money continues to move about, but it’s staying in the market, not moving out of the market,” he said. “Investors are becoming more confident, and unless we get disastrous results [in today’s data]--in the market’s eyes--the decline will be a short one.”

There was a flurry of new economic data released Thursday, but none of it seemed quite so pivotal when sandwiched between key reports such as today’s payroll data and Tuesday’s and Wednesday’s readings on employment costs and the overall pace of the economy.

Those reports revealed that although business activity remained vigorous in the first quarter, there was only a modest increase in wages and compensation--which account for two-thirds of a product’s price.

Investors will be looking in today’s report for confirmation that payroll and wage levels didn’t surge as the second quarter began in April.

The blue-chip pullback came despite another strong day in the bond market, where interest rates continued a weeklong drop.

Analysts said bond traders were encouraged by reports that White House and congressional negotiators have agreed on a balanced-budget deal, which would eventually bolster bond prices by limiting the supply of government debt securities in the Treasury market.

As the benchmark 30-year U.S. Treasury rose, its yield dropped to 6.92% from Wednesday’s close of 6.95%.

On the New York Stock Exchange, advancing issues outnumbered decliners by an 11-to-8 margin in moderate trading.

The Standard & Poor’s 500-stock list fell 2.81 points to 798.53, and the NYSE’s composite index fell 1.23 points to 415.71.

But the Nasdaq composite index rose 9.74 points to 1,270.50.

Among Thursday’s highlights:

* Technology issues were boosted by strong showings in the battered computer-networking sector, including Cisco Systems, up 1 5/8 to 53 3/8, and 3Com, up 2 to 31.

Elsewhere in the sector, Micron Technology rose 2 7/8 to 38 1/8 and Compaq Computer rose 2 7/8 to 88 1/4.

* The Dow’s biggest decliners were DuPont, down 2 7/8 to 103 1/4; Johnson & Johnson, down 1 1/2 to 59 5/8; and Coca-Cola, down 1 1/2 to 62 1/8.

* Reebok International, stung by falling market share in recent years, gained 1/8 to 38 1/2 after a majority of shareholders, led by the California Public Employees’ Retirement System, voted against management and for a proposal to cut directors’ terms to make them more accountable.

* Airline issues were among the biggest decliners in the S&P; 500, after Merrill Lynch & Co. reduced its investment opinion on United Airlines parent UAL Corp., which fell 2 1/2 to 71 7/8. Southwest Airlines fell 1 1/8 to 26 3/8 and US Airways Group declined 1 to 31 3/8.

* Among firms reporting quarterly results, HFS rose 1/4 to 59 1/2 after its profit exceeded analysts’ expectations, and Hambrecht & Quist rose 5/8 to 17 1/4 despite a decline in earnings.

* A number of small tech and telecom issues gained. CCC Information Services Group rose 1 to 12 3/4, Novellus Systems jumped 4 3/4 to 62 1/2, Glenayre Technologies zipped 1 1/8 to 11, and Sierra Semiconductor gained 1 1/4 to 18 1/8.

But PairGain Technologies slumped 3 5/8 to 22 3/8 after telling investors its profit margin would slide toward 20% in the latest quarter.

* Southland mortgage company Aames Financial fell 3 1/8 to 12 1/4 after it said it would reduce its bulk purchases of mortgage loans from secondary markets, leading to reduced lending income.

In the commodities market, coffee prices soared to the highest levels in almost three years in frenzied trading amid fears about shrinking warehouse stocks.

At the Coffee, Sugar and Cocoa Exchange in New York, coffee for May delivery ended at 252.75 cents a pound, up 13.70 cents on the day and up 36 cents, or 17% since April 25.

The day’s high of 255.00 cents was the highest price for coffee since mid-July 1994, when prices reached 263.50 cents after frosts badly damaged the crop in Brazil, the top world grower.

In currency trading, the dollar hit an intraday high of 127.47 Japanese yen, the strongest since August 1992, before retreating to settle in New York at 126.51 yen, down from 127.06 yen Wednesday.