By Amy Baldwin
Associated Press
NEW YORK – Tech stocks led the market lower Friday after profit warnings from Sun Microsystems, Advanced Micro Devices and Gateway rattled Wall Street, reminding investors of the weak economy and prompting them to cash in some profits.
The downturn was expected given how Wall Street has been rallying hard much of this week, driven by lower interest rates, a possible economic stimulus plan and upbeat forecasts from Cisco Systems and Dell Computer. Analysts say any gains will be vulnerable while investors await signs that business is improving and while it’s still unknown how the United States will retaliate for the Sept. 11 terrorist attacks.
“It’s still a very tenuous time,” said Arthur Hogan, chief market analyst at Jefferies &Co.
In midafternoon trading, the Dow was down 40.12 at 9,020.76, but still held on to more than half the 1,369 points lost in the first week of trading following last month’s terrorist attacks.
The broader market was also lower. The Nasdaq composite index, which climbed 116 points in the previous three sessions, was down at 16.44 at 1,580.87. The Standard &Poor’s 500 index declined 9.72 to 1,059.90.
Among the tech losers, computer chip maker AMD stumbled 16 cents to $8.84 after warning of a bigger third quarter losses.
But Sun Microsystems rose 9 cents to $9.38 despite warning of a wider loss for its fiscal first quarter, and Gateway, which issued a third-quarter warning, rose 13 cents to $4.98.
Still, the big-name tech warnings disappointed investors who had been growing optimistic about the tech sector as Dell Computer affirmed its earnings expectations on Thursday and Cisco stood by its outlook on Tuesday.
After rising on those announcements, those two tech bellwethers gave back some gains Friday. Dell fell 99 cents to $21.33, while Cisco declined 27 cents to $14.15.
Analysts this week have cautioned investors about their newfound enthusiasm for tech. They say it’s too soon for a rebound as companies continue to struggle with excess inventory and slumping demand.
The market should be skeptical of bullish comments from high-tech companies as it was before the terrorist attacks, said Richard A. Dickson, a technical analyst at Hilliard Lyons in Louisville, Ky.
“How many times have we heard this from tech?” Dickson said of the positive comments from Dell and Cisco.
Outside technology, the market was also lower, indicating investors were again doubtful that any business will fare better amid the economic and political uncertainty. American Express fell $1.58 to $27.30, and 3M tumbled $1.32 to $98.32.
Spurts of optimism and pessimism are likely to define trading for the remainder of the year as they did this past week, analysts said.
Investors were encouraged by lower interest rates as the Federal Reserved cut them for the ninth time this year, and the possibility of an economic stimulus package, which is being pushed by President Bush and would be worth up to $75 billion. But the warnings from Sun, AMD and Gateway tempered investors’ optimism.
“My forecast going forward is that we don’t have much more than 5 percent on the upside and downside,” said Charles Pradilla, chief investment strategist at SG Cowen Securities.
Pradilla added that Wall Street is experiencing “a tug-of-war between pressure on profits and the traumatized consumer and extraordinarily low interest rates and the possibility of an enormous economic stimulus package.”
Friday’s gainers were confined to safer havens, such as food and drugs. Procter &Gamble rose $1.18 to $72.38, while Johnson &Johnson advanced 90 cents to $55.35.
Analysts said the market was not surprised by a report on the nation’s unemployment, which remained at 4.9 percent in September as companies slashed 199,000 jobs last month, the largest job loss in more than a decade. The Labor Department’s report showed that the labor market was still under intense pressure before the Sept. 11 attacks.
Declining issues outnumbered advancers nearly 3 to 2 on the New York Stock Exchange. Volume was 835.83 million shares, below the 1.06 billion shares that were traded at the same point Thursday.
The Russell 2000 index, which gauges the performance of smaller company stocks, fell 5.99 to 411.05.
Overseas markets were mixed Friday. Japan’s Nikkei stock average finished the day essentially unchanged. In Europe, France’s CAC-40 lost 0.7 percent, and Germany’s DAX index fell 1.4 percent. while Britain’s FT-SE 100 rose 0.4 percent.
Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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