NEW YORK -- U.S. stocks fell yesterday for a second day in light trading, led by a slump in semiconductor and computer shares.
The Dow Jones industrial average closed down 6.46, at 3,749.45, extending Tuesday's 12.61-point drop. The average had risen as much as 11.08 points, then fell as much as 23.08, before advancing from its low.
Computer companies skidded after Merisel Inc., a computer distributor, said earnings will fall below investor expectations. Computer stocks also reeled as people braced for today's release of a monthly report on semiconductor orders, traders said.
Merisel's outlook compounded concern that the Federal Reserve Board's four interest-rate increases this year are having the desired effect of reining in economic growth, traders said. Slower growth bodes ill for corporate profit gains.
"People were already concerned that the Fed's tightening is slowing down the economy, especially for some of these companies that are dependent on advance orders," said Peter DaPuzzo, senior managing direc tor at Cantor, Fitzgerald & Co. "Merisel put the second nail in the coffin."
The Nasdaq combined composite index tumbled 9.51, to close at 729.79. The Standard & Poor's 500 index eased 1.14, to 457.07, after slipping 0.66 Tuesday.
Eleven shares dropped for every 10 that rose on the New York Stock Exchange. Trading was slow, with about 258 million shares changing hands on the Big Board, compared with 234 million Tuesday.
Caterpillar Inc. led the Dow lower. Concern about higher rates hurting the economy pushed its stock down $1.625, at $104.375, even though the construction machinery maker doubled its common-stock dividend and recommended a stock split. The decline in Caterpillar stock lopped 4 index points off the Dow.
Stocks tracked movements in the bond market. Bonds rallied overnight after Federal Reserve Chairman Alan Greenspan told a banking conference in London that inflation is "clearly restrained." His comments allayed concern that the Fed would boost rates again to stem inflation.
But bonds, along with stocks, faded when Commerce Secretary Ronald H. Brown said trade sanctions against Japan "can't be ruled out." His comments drove the dollar lower against the yen, fueling concern that a weak currency will reduce Treasury bonds' appeal to foreign investors. Bonds extended their losses as rising commodity prices rekindled concern about inflation.
The benchmark 30-year bond rallied as much as 3/4 point, driving the yield down to 7.18 percent, before slumping and sending the yield back up to 7.28 percent, up 2 basis points from Tuesday.
Computer hardware and software makers paced the stock market's decline.
Technology shares are "getting killed," said Lance Zipper, head Nasdaq trader at Kidder, Peabody & Co.
Merisel, the second most actively traded U.S. stock after Microsoft Corp., plunged $6.75, to $10. The company said slower U.S. sales growth will result in second-quarter earnings as much as two-thirds below analysts' forecasts.
Merisel's outlook came two days after a similarly bleak forecast from another computer retailer, CompUSA Inc. The combination raised concern about the computer industry's growth prospects, traders said.
Other computer retailers also tumbled. Intelligent Electronics Inc. slumped $2.375, to $18.75. CompUSA closed down 75 cents, at $9.125.