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.
Track Your Stocks | Check Your Portfolio
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.
Stocks to Watch
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.
Dow component General Motors rose $1.08 to $57.33. The world's top automaker reached an agreement with the main creditor of South Korea's Daewoo Motor to make an offer for assets and related businesses of the bankrupt car maker.
Crit Thomas, a portfolio manager for National City Investment Management Co., which oversees $25 billion, said he was "cautiously optimistic" the tech sector's downturn is temporary. "We've had a nice move in tech, we could just need some time to absorb that," he said.
Indeed, the market had headed higher since early April amid hopes that worse of the economic downturn had passed. The Federal Reserve has ratcheted down interest rates five times this year to help spark a recovery.
With earnings worries weighing on stocks in the short term, Wall Street didn't take much heart from the latest data on consumer confidence.
The Conference Board said its broad index of consumer attitudes jumped to 115.5 in May, up from an upwardly revised 109.9 in April, showing Americans were still optimistic about the economy and the employment outlook. Economists polled by Reuters had forecast a 111.2 reading.
In a separate report, the government said Americans increased spending more quickly than their incomes grew in April, suggesting that economic weakness has not severely dented consumer buying behavior.
The Commerce Department reported personal income grew at a seasonally adjusted 0.3 percent annual rate in April, down from March's 0.5 percent pace. But spending on goods and services grew at a faster 0.4 percent pace, up from March's 0.2 percent rate.
On Friday, stocks fell in listless pre-holiday trading after the government said economic growth slowed more than previously thought and Federal Reserve Chairman Alan Greenspan warned the weakness could linger.
The New York Stock Exchange said it posted its slowest trading day of the year and the Nasdaq composite index said it had its second-slowest day of the year Friday as investors and traders headed home early in the day for a three-day weekend.
The Dow Jones industrial average lost 117.05 points, or 1.05 percent, to 11,005.37. The broader Standard & Poor's 500 Index declined 15.28 points, or 1.18 percent, to 1,277.89.The Nasdaq Composite Index fell 30.99 points, or 1.36 percent, to 2,251.03.
The Dow is up 2 percent, the S&P off 3.2 percent and the Nasdaq down 8.9 percent year to date.