Dow , Nasdaq Lose After Days of Gains

N E W  Y O R K,  May 23, 2001 -- Stocks fell asprofit-taking and a return of corporate profit worries ended aweek-long equities rally that was kicked off last week by theFederal Reserve's fifth interest-rate cut this year.

Track Your Stocks | Check Your Portfolio

The Dow Jones industrial average fell 151.73 points,or 1.35 percent, to 11,105.51, according to the latest data.The Nasdaq Composite Index dropped 67.80 points, or2.93 percent, to 2,246.05. The benchmark Standard & Poor's 500index fell 19.99 points, or 1.53 percent, to 1,289.39.

The Nasdaq, which had been battered over the past year, hasnonetheless risen about 40 percent by the start of this weekfrom a two-and-a-half-year low it hit on April 4. The Dow andS&P were up about 20 percent and 17 percent, respectively, fromMarch lows. The latest leg of the advance came after the U.S.Federal Reserve slashed interest rates last week for the fifthtime this year by half a percentage point to lift the nation'seconomy.

"There isn't much on the horizon that would point toimproving earnings in the near future," said Edgar Peters,chief investment officer at PanAgora Asset Management Inc.,which manages $15 billion.

"There is going to be some improvement, but not to a levelthat would justify this run-up," he added. "There is someentrenchment going on. People realize they made some money andmaybe should cash that in."

Setting the tone was a bearish report on the chip industrypublished by the trade group Semiconductor Equipment andMaterials International, or SEMI. Orders from NorthAmerican-based chip equipment companies plunged 41 percent inApril compared with March levels, while the book-to-bill ratioplummeted to 0.42, the worst in 10 years.

The Philadelphia Stock Exchange semiconductor indexdropped nearly 5 percent on Wednesday. Applied MaterialsInc., the top maker of equipment used to makesemiconductors, fell $3.65 to $52.94. Rival KLA-Tencor Corp.

Worries About the Euro

The losses followed the release late Tuesday of a reportthat showed orders for gear from North American-basedchip-equipment companies plunged 41 percent to $711.8 millionin April from the previous month amid the worst slump in thesemiconductor industry since 1985.

Graphics semiconductor maker Nvidia Corp., however, rose$4.32 to $97.22 after it reported net income that rose 41percent — bucking the trend of other chipmakers — as salessurged 62 percent.

Investors were also spooked by a decline in the value ofthe euro, the single European currency, to new multi-month lowsafter unexpectedly weak growth data from Germany and France.Strong German inflation data released overnight also hurt theeuro and gave investors another reason to worry. U.S.multinationals have cited the weak euro in the past as onereason for earnings shortfalls.

Retailing stocks came under pressure after some downbeatearnings from sectoral firms, with the S&P retail index (.RLX)falling 2.23 percent. Among those, department store chainDillard's Inc. (DDS.N) reported a 54 percent slide in quarterlyoperating profits as the slowing economy prompted consumers tocut back on purchases. Dillard's fell $2.14 to $17.38.

The second-most active stock on the New York Stock Exchangewas Medtronic Inc., which fell $2.54 to $41.95. The world'slargest manufacturer of medical devices reported a 15 percentrise in earnings, but its sales numbers disappointed investorsand prompted some brokerages to sour on the stock. J.P. Morganlower its investment rating on Medtronic to a "long-term buy"from "buy" and Goldman Sachs cut its price target on the stockto $53 from $60.

Agile Software, a business-to-business software firm, fell$1.43 to $19.20, after it posted a quarterly operating loss inline with lowered expectations. Novell Inc. (NOVL.O), which istransforming itself into a provider of Internet solutions forcorporations, posted a loss and said it would cut 5 percent ofits work force as part of a bid to return to profitability.Novell fell 35 cents, or 6.99 percent, to $4.66.

French telecoms gear maker Alcatel saw its U.S.-listedshares fall $1.56 to $30.08 on reports that merger talks withU.S. rival Lucent Technologies Inc. were moving ahead. Lucentshares slipped 19 cents at $9.71. The Wall Street Journal saidboards at Alcatel and Lucent had agreed to more talks thatcould lead to a $34 billion merger.

Dell Computer Corp. rose $1.20 to $27.14 on the Nasdaq, fora gain of 4.6 percent after upbeat comments on the computermaker from Merrill Lynch and Goldman Sachs.

The shares of Goldman Sachs Inc. slumped $3.36 to $99.93after the top Wall Street firm has axed 150 investment bankers.The job cuts are part of its plans to cut its existing workforce by around 5 percent, which was spelled out earlier thisyear.

Ford Motor Co. shed 94 cents to $25.04. PrudentialSecurities lowered its 12-month price target on Ford to $27from $33, reflecting concerns over a stalled share buyback,which it said removed support for the stock. Ford took outfull-page newspaper advertisements on Wednesday to present itscase for replacing 13 million Firestone tires, while the tiremaker stepped up its own efforts to defend its image.