Technology stocks fell today, after a big Wall Street house cropped its earnings forecasts for network computer maker Sun Microsystems and data storage firm EMC Corporation -- reawakening fears the soft economy will continue to hit corporate profits.
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Blue-chip stocks, however, scraped out small gains as investors hunted for companies, like pharmaceuticals giant Merck & Co. and cigarette maker Philip Morris with more predictable earnings in the economic downturn.
"I would love to have a recovery in hand, but I don't think it's in hand yet," said Tom Sparico, managing director of equities at broker/dealer Bengal Partners. "It's just too soon. We have to digest this slowdown process first and, ultimately, it will lay the groundwork for a very robust recovery."
The Nasdaq Composite Index dropped 75.49 points, or 3.35 percent, to end at 2,175.54. Cisco Systems, the world's No. 1 maker of gear that powers the Internet, lost $1.59 at $20.46 and led the tech-packed index lower.
The Dow Jones industrial average gained 33.77 points, or 0.31 percent, at 11,039.14, after wobbling around the unchanged mark much of the session. Merck climbed $1.79 to $74.39 and Philip Morris rose $1.11 to $51.64, boosting the blue-chip gauge.
The broader Standard & Poor's 500 Index lost 9.96 points, or 0.78 percent, to 1,267.93. Trading was light as many investors tacked on another day to their long Memorial Day weekend.
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Sun Microsystems and EMC slumped after Goldman Sachs analyst Laura Conigliaro lowered 2001 and 2002 earnings estimates on the companies, saying there was "no notable improvements in the U.S." and citing a slowdown in Europe. Sun was the second most-active traded on Nasdaq, dropping $1.80 to $18.67. EMC skidded $3.11 to $33.99.
The weak outlook made Wall Street wary of high-priced tech shares ahead of the period when many companies warn their quarterly results may not meet analysts' expectations. This so-called "pre-announcement season" begins in about two weeks.
Business software maker Oracle declined 90 cents to $15.61. Chip leader Intel lost $1.25 to $27.85. Computer heavyweight International Business Machines fell $2.53 to $115.27. Cisco's rival Juniper Networks surrendered $5.77 to $46.39.
"Investors use the opportunity of an analyst downgrade" to dump shares, said Ned Riley, chief investment strategist for State Street Global Advisors, which oversees $40 billion. "There's a fear that pre-announcements may bring even more negativism and a less-than-positive outlook for the shorter term."
French telecommunications equipment maker Alcatel slipped 70 cents to $27.41 in U.S. trading on reports that it was negotiating to buy floundering U.S. rival Lucent Technologies Inc. for nearly $23 billion.
Lucent dropped $1.08 cents to $8.32 on disappointment the proposed deal won't value shares as high as investors had hoped. Sources warned, however, the talks could break down.
Phone giant AT&T slipped 38 cents to $20.68. The Dow component said it completed its offer to exchange AT&T Wireless Group stock for shares of AT&T common stock, but fewer-than-expected shares were exchanged.
Media company AOL Time Warner declined $2.53 to $51. Software giant Microsoft off 57 cents at $70.34, said its MSN Internet unit launched a $50 million campaign to lure consumers from rival America Online.