Stocks Drop on Profit Taking; Bonds Slump

Blue-chip stocks fell Wednesday as investors took profits a day after the market rallied on the Federal Reserve Board’s decision to hold interest rates steady.

Bonds also slid, but the dollar rose as a sharp drop in the U.S. trade deficit signaled strong economic growth and lifted prospects that the central bank would raise rates soon.

The Dow Jones industrial average closed down 12.77 points at 7,290.69 after soaring about 75 points Tuesday.

In the broader market, a powerful profit report from Dell Computer energized the technology sector, pushing Nasdaq to a positive finish; other indexes ended lower.

Stocks surged initially but then fell as much as 50 points under pressure from a weak bond market.

Bond prices slumped after the government said the nation’s trade deficit plunged 19.3% to $8.51 billion in March, well below the $10.3-billion gap economist had forecast. Both imports and exports hit record highs.

The benchmark 30-year Treasury bond fell nearly three-quarters of a point, which raised its yield to 6.95% from 6.90% at Tuesday’s close.

The trade numbers, which pointed to strong U.S. growth, particularly in the export sector, mean the government might have to revise upward its estimate of 5.6% first-quarter growth--its fastest pace in more than nine years.

On Tuesday, the Fed kept interest rates unchanged in hopes that the economy would slow from its recent breakneck pace.

Advancing issues outnumbered decliners by more than a 5-4 margin on the New York Stock Exchange, where trading was heavy.

The Standard & Poor’s 500-stock list fell 2.31 points to 839.35, and the NYSE composite index fell 0.99 point to 436.21. Both big-company measures bobbed into record territory during the morning before turning lower.

But the Nasdaq composite index rose 9.87 points to 1,373.75.

Among Wednesday’s highlights:

* Nasdaq was led by Dell, which soared 7 1/8 to 106 3/4. Among other computer shares, Compaq rose 5 3/4 to 102 3/4, while IBM rose 1 3/8 to 175 1/8 and Hewlett-Packard rose 1 1/8 to 54.

Microsoft climbed 1 7/8 to 121, Intel rose 1 1/2 to 162 1/2, Cisco Systems rose 1 1/2 to 65 7/8 and Oracle climbed 1 1/2 to 46 3/4.

Dell said its profit increased in part because of lower component costs. Seagate Technology dropped 3 1/8 to 42 1/4. Quantum slid 3 3/4 to 37 5/8 and Western Digital declined 4 3/4 to 58 1/2.

* Financial issues pulled back from Tuesday’s gains. Prominent among the Dow’s decliners were Travelers Group, down 1 3/4 to 55 7/8; J.P. Morgan, down 1 3/8 to 103 7/8; and American Express, down 1 1/4 to 69 1/2.

Citicorp fell 3 to 117 1/8, Chase Manhattan slid 2 1/2 to 94, BankBoston was off 1 7/8 to 74 7/8 and BankAmerica fell 3 1/8 to 114 3/8.

* Mutual fund companies gained. T. Rowe Price Associates added 2 1/4 to 50, Franklin Resources climbed 3/4 to 64 1/2 and Marsh & McLennnan increased 1 3/8 to 130.

* Boeing jumped 2 3/8 to 102 3/8 after a report citing sources saying Continental Airlines ordered 40 planes valued at $4 billion. Continental gained 1/4 to 35 5/8.

* The Dow Jones Transportation Average briefly leaped to an all-time high before retreating to 2,660.54, down 13.10.

The climb to a record is a good omen for the stock market, investors said, because brisk demand for transportation services suggests manufacturing companies and the economy are doing well.

Among the gainers, CSX rose 3/8 to 51 5/8, Union Pacific rose 3/8 to 67 1/2 and Burlington Northern Santa Fe added 3/4 to 81 1/4.

In currency trading in New York, the dollar settled at 114.18 Japanese yen, up from 113.04 on Tuesday.

Overseas, Tokyo’s Nikkei-225 stock average fell 2.4%, Frankfurt’s DAX index rose 1.5%, and London’s FTSE-100 rose 0.7%.