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Equities lower

NEW YORK: Weakness in technology issues dragged the stock market lower at midday on Tuesday as fears that interest rates will go up sharply spread to the sector, a day before Federal Reserve Chairman Alan Greenspan's second round of Congressional testimony on the economy.

An early rally fizzled after Federal Reserve Bank of New York President William McDonough said the U.S. central bank will keep raising interest rates as long as domestic demand remains as strong as it currently is.

The Dow Jones industrial average . lost 17.68 points, or 0.17 percent, at 10,201.84, adding to its 295-point slide from Friday.Pulling down the 30-stock index were technology heavyweights such as International Business Machines Corp., the world's biggest computer maker, off 2-7/8 at 109-3/4, and No. 1 chipmaker Intel Corp., off 3 at 102-3/8.

The Dow sank deeper into a correction mode, having fallen more than 10 percent from its Jan. 14 high of 11,722.98. The broader Standard & Poor's 500 index .SPX fell 5.94 points, or 0.44 percent, to 1,340.15.

In the Nasdaq composite index ., the downdraft was more dramatic, with the technology-weighted losing 74.46 points, or 1.69 percent, to 4,337.28.

Some of the biggest losses were in the biotechnology and Internet sectors, which up until now had not reacted to the prospect that the Fed would hike borrowing costs substantially to slow the economy.

The Nasdaq biotech index .B was off 3.38 percent. Shares of Human Genome Sciences Inc., which had soared last week on news of an AIDS-related patent, skidded 23-1/8 to 177-1/8.-Reuters

Treasuries higher

NEW YORK: U.S. Treasuries were higher at midday on Tuesday as investors covered short positions, particularly in two- and five-year maturities, as U.S. stocks added to losses incurred late last week.

Both 30-year bonds and 10-year notes were up by more than a full point earlier in the session. As blue-chips recovered from session lows toward midday, however, bonds reduced their gains.

In late morning trade, the five-year note yield momentarily dipped below that of the two-year note.

The 5-year note was up 14/32 to 97-6/32, yielding 6.57 percent.

The 30-year was up 29/32 to 102-7/32 to yield 6.09 percent.

The March bond future price USH0 was up 29/32 to 95-25/32.

Buying by Asian investors of longer-term issues, prompted by the yen's slide against the dollar, and gains in euro zone government debt also aided U.S. Treasury prices, traders said.

New York Federal Reserve President William McDonough remarked on a wide variety of issues at a breakfast in New York on Tuesday. Economists said his comment that inflation was low and probably would go down a bit was constructive for bonds.

McDonough also said he did not see the recent inversion of the yield curve as a sign of impending recession.

Abate observed that the calendar of economic data for Treasuries this week was relatively light.

Federal Reserve Chairman Alan Greenspan is scheduled to deliver his Humphrey-Hawkins testimony again on Wednesday, this time to the Senate Banking Committee. The difference in yields between two- and 30-year issues widened to 52 basis points from 48 bp on Friday and versus 33 basis points at Wednesday's close, before Greenspan's semi-annual Humphrey-Hawkins testimony to U.S lawmakers. Bond and stock markets have traded in an inverse fashion in recent sessions, with investors moving into the relative safe haven of bonds as equities dive.-Reuters