Talk of Tech Trouble Saps Stocks; Bond Yields Ease

Stocks closed modestly lower Wednesday amid fresh warnings of disappointing profits by some technology companies.

Meanwhile, bond yields fell again to their lowest levels since late February.

On Wall Street the Dow Jones industrial average ended down 42.07 points at 7,718.71, its third straight decline after rocketing last week to new highs.

In the broad market, losers narrowly outnumbered winners on the New York Stock Exchange. Most broad indexes were down by small amounts.

Stocks dipped despite a Federal Reserve Board report suggesting that the economy is losing steam--exactly what many investors want to see, because it could keep the Fed from tightening credit again.

That report helped send bond yields lower across the board. The yield on the benchmark 30-year Treasury bond fell from Tuesday’s 6.71% to 6.68%, the lowest since Feb. 25.

A separate government report Wednesday showed the productivity of American workers rose at the fastest rate since 1993 during the first three months of this year.

Instead of tracking bonds, the stock market was somewhat unnerved by warnings by personal computer manufacturer Gateway 2000 and by computer disk drive maker Seagate Technology of disappointing quarterly results.

Those warnings raised new fears that computer sales may be slowing industrywide, although many analysts still say there is no evidence of that.

In any case, the damage to the tech sector was fairly limited. The tech-heavy Nasdaq composite index fell just 10.68 points to 1,432.43, ending three consecutive sessions of record-breaking closes.

Market volatility is expected to rise through the week as Friday’s “triple witching” quarterly expiration of stock options and futures nears.

Among Wednesday’s highlights:

* Seagate tumbled 5 1/4 to 36 1/4 on its earnings warning, while Gateway actually rose 1 3/4 to 32. Gateway shares had already fallen from 37 since the end of May.

* Other tech shares losing ground included Compaq, down 7/8 to 106 7/8; Intel, down 3 2/16 to 146 9/16; Microsoft, down 4 to 130 3/16; Texas Instruments, down 3 3/8 to 86 1/4; and Dell, down 4 to 116 7/8.

Also, Adobe Systems fell 1 5/16 to 40 1/4 after reporting quarterly earnings below expectations. And Oracle lost 2 15/16 to 50 5/16 after its earnings report failed to beat expectations.

* On the plus side, Visx jumped 2 3/16 to 24 3/16 after it agreed to pay $4.5 million to Summit Technology to settle all patent infringement claims between the two laser cornea surgery companies.

* Tax preparation firm H&R; Block fell 2 3/4 to 32. It reported higher profit for the fourth quarter but a sharp drop in earnings for the fiscal year due to losses at its majority-owned CompuServe online service.

* Energy issues dropped from all-time highs set earlier this week as crude prices declined. Exxon eased 1/4 to 63 3/8, Mobil declined 1 3/8 to 141 1/4 and Texaco was down 3/4 at 112 7/8.

* Pep Boys rallied 2 1/2 to 33 3/8 after agreeing to supply auto parts and service to AutoNation USA, the used-car unit of Republic Industries, which rose 3 3/8 to 23 11/16.

Overseas, Tokyo’s Nikkei stock average closed down 0.5%. Frankfurt’s DAX slipped 0.3% and London’s FTSE-100 was down 0.5%.

In commodities trading, gold prices edged down to near four-year lows. (Investor Spotlight, D8.)