Stocks Fall on Renewed Jitters

Stocks fell today as technology stocks led the market down amid negative comments about the prospects for computer-chip makers and related companies, including Applied Materials.

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The Nasdaq composite index fell 55.66, or 2.67 percent, to 2,029.13, according to the latest data, while the Dow Jones industrial average dropped 66.94 points, or 0.64 percent, to 10,472.12. The benchmark Standard & Poor's 500 index lost 13.23 points, or 1.09 percent, to 1,202.45.

"Reality has hit this group on a shorter-term basis, and the optimism that may have prevailed vis-a-vis an earlier turnaround was at least diminished if not extinguished by these latest pronouncements," said Ned Riley, chief investment strategist at State Street Global Advisors.

Report Lowers Sentiment

Art Hogan, chief market analyst at Jefferies & Co., said brokerage Wit Soundview was one of the purveyors of bad news on the semiconcductor companies. Hogan said a research note from the firm reflected bearish comments by officials of chip equipment maker Applied Materials at the Semicon West meeting in San Francisco.

Applied Materials, a maker of equipment used to make semiconductors, fell 9.5 percent, or $4.41, to $41.95. The company met with analysts at the industry conference, but the company was not available to comment on the proceedings.

"The Wit Soundview report was basically a confirmation of what the AMAT [Applied Materials] officials had said and that was basically that there still seems some softness into next year in this space," Hogan said.

Amid worries around the Applied Materials conference and analyst comments, "there's negative concern about the group," said Tim Grazioso, manager of Nasdaq trading for Cantor Fitzgerald & Co.

Corporate News

Elsewhere, investors got earnings reports from some of the 1,500 companies set to hand in their scorecards this week, including a mixed bag of results from financial services heavyweights like Citigroup and The Bank of New York.

Citigroup rose 29 cents to $49.15 and Bank of New York tumbled nearly 13 percent, or $6.40, to $43. Bank of New York, parent of one of the oldest U.S. commercial banks said its

profits rose 8 percent, put predicted future earnings could fall slightly short of expectations if weak stock-market conditions persist.

Satellite service provider Hughes Electronics Corp., which warned last month that it would add significantly fewer customers than expected in the second quarter, reported lower cash flow from operations for the period and cut its outlook for the full year. Its shares tumbled $1.50 to $18.95.

A big decliner was drugmaker Pharmacia Corp. which fell more than 8 percent, or $4.19 to $42.66. The company said after Friday's close it will supply extra clinical data to the U.S. Food and Drug Administration, which found deficiencies in Pharmacia's application for its pain management drug, parecoxib sodium.

Check on the Economy

The Commerce Department issued May business inventory figures that showed an unchanged reading. The market, analysts said, is likely to take this somewhat negatively as economists on average were expecting a decline of 0.1 percent. The government also revised its April reading to a decline of 0.2 percent, compared with a previous reading of unchanged.

Working off inventories "would be one of the major things we need to accomplish in the near term to get any sort of turnaround in the global economy," said Jefferies' Hogan.

Federal Reserve Bank of Dallas President Robert McTeer said Sunday he does not see much hope that the U.S. economy will rebound strongly very soon, and he left the door open for further interest-rate cuts.

McTeer told legislators from Georgia that the United States is not in a recession, but is mired in a sharp growth slowdown.

"I don't see anything for a strong near-term recovery," McTeer said at the annual meeting of the Council of State Governments' Southern Legislative Conference in Savannah.

Friday’s Highlights

U.S. stocks inched higher Friday as Wall Street looked past disturbing profit reports to bet the outlook may improve later in the year. Gains came even after tech firms, such as Rambus Inc., said earnings fell amid soft demand in the slowing economy.

On Thursday, stocks racked up their biggest gains in more than two months after corporate icons such as software titan Microsoft Corp. boosted hopes that profits could edge higher by the fourth quarter.

The tech-rich Nasdaq Composite Index rose 9.05 points, or 0.44 percent, to 2,084.79, Friday, and the blue-chip Dow Jones industrial average gained 60.07 points, or 0.57 percent, to 10,539.06. The broader Standard & Poor's 500 Index added 7.54 points, or 0.62 percent, to end at 1,215.68.