Stocks Mixed as Profit-Takers Send Nasdaq Lower

N E W  Y O R K, May 29, 2001 -- Technology stocks felltoday, after a big Wall Street house cropped its earningsforecasts for network computer maker Sun Microsystems and data storage firm EMC Corporation -- reawakeningfears the soft economy will continue to hit corporateprofits.

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Blue-chip stocks, however, scraped out small gains asinvestors hunted for companies, like pharmaceuticals giantMerck & 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 thinkit's in hand yet," said Tom Sparico, managing director ofequities at broker/dealer Bengal Partners. "It's just too soon.We have to digest this slowdown process first and, ultimately, itwill lay the groundwork for a very robust recovery."

The Nasdaq Composite Index dropped 75.49 points, or3.35 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 33.77points, or 0.31 percent, at 11,039.14, after wobbling aroundthe unchanged mark much of the session. Merck climbed $1.79 to$74.39 and Philip Morris rose $1.11 to $51.64, boosting theblue-chip gauge.

The broader Standard & Poor's 500 Index lost 9.96points, or 0.78 percent, to 1,267.93. Trading was light as manyinvestors tacked on another day to their long Memorial Dayweekend.

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Sun Microsystems and EMC slumped after Goldman Sachsanalyst Laura Conigliaro lowered 2001 and 2002 earningsestimates on the companies, saying there was "no notableimprovements in the U.S." and citing a slowdown in Europe. Sunwas 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 techshares ahead of the period when many companies warn theirquarterly results may not meet analysts' expectations. Thisso-called "pre-announcement season" begins in about two weeks.

Business software maker Oracle declined 90cents to $15.61. Chip leader Intel lost $1.25 to$27.85. Computer heavyweight International Business Machinesfell $2.53 to $115.27. Cisco's rival JuniperNetworks surrendered $5.77 to $46.39.

"Investors use the opportunity of an analyst downgrade" todump shares, said Ned Riley, chief investment strategist forState Street Global Advisors, which oversees $40 billion."There's a fear that pre-announcements may bring even morenegativism and a less-than-positive outlook for the shorterterm."

French telecommunications equipment maker Alcatelslipped 70 cents to $27.41 in U.S. trading on reports that itwas negotiating to buy floundering U.S. rival LucentTechnologies Inc. for nearly $23 billion.

Lucent dropped $1.08 cents to $8.32 on disappointment theproposed deal won't value shares as high as investors hadhoped. 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&TWireless 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 campaignto 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 themain creditor of South Korea's Daewoo Motor to make an offerfor assets and related businesses of the bankrupt car maker.

Crit Thomas, a portfolio manager for National CityInvestment Management Co., which oversees $25 billion, said hewas "cautiously optimistic" the tech sector's downturn istemporary. "We've had a nice move in tech, we could just needsome time to absorb that," he said.

Indeed, the market had headed higher since early April amidhopes that worse of the economic downturn had passed. TheFederal Reserve has ratcheted down interest rates five timesthis year to help spark a recovery.

Economic Docket

With earnings worries weighing on stocks in the short term,Wall Street didn't take much heart from the latest data onconsumer confidence.

The Conference Board said its broad index of consumerattitudes jumped to 115.5 in May, up from an upwardly revised109.9 in April, showing Americans were still optimistic aboutthe economy and the employment outlook. Economists polled byReuters had forecast a 111.2 reading.

In a separate report, the government said Americansincreased spending more quickly than their incomes grew inApril, suggesting that economic weakness has not severelydented consumer buying behavior.

The Commerce Department reported personal income grew at aseasonally adjusted 0.3 percent annual rate in April, down fromMarch's 0.5 percent pace. But spending on goods and servicesgrew at a faster 0.4 percent pace, up from March's 0.2 percentrate.

Friday’s Highlights

On Friday, stocks fell in listless pre-holiday tradingafter the government said economic growth slowed more thanpreviously thought and Federal Reserve Chairman Alan Greenspanwarned the weakness could linger.

The New York Stock Exchange said it posted its slowesttrading day of the year and the Nasdaq composite indexsaid it had its second-slowest day of the year Friday asinvestors and traders headed home early in the day for athree-day weekend.

The Dow Jones industrial average lost 117.05 points,or 1.05 percent, to 11,005.37. The broader Standard & Poor's500 Index declined 15.28 points, or 1.18 percent, to1,277.89.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 theNasdaq down 8.9 percent year to date.