Among software stocks, Oracle Corp declined US$0.71 to US$18.22, PeopleSoft Inc dropped US$3.16 to US$40.85, and Microsoft Corp fell US$2.45 to US$66.06.
A report showing the US lost more jobs than expected last month had little impact on stocks. Many investors say they expect the Federal Reserve's six interest-rate cuts in 2001 to start benefiting the world's largest economy later this year.
The unemployment rate rose last month, matching a two-year high, and the economy lost jobs for a third straight month.
"The direction of the stock market will be based on corporate earnings and any type of forecasts for the rest of the year and maybe the beginning of an outlook for 2002,'' said David Rolfe, chief investment officer at Wedgewood Partners Inc., which manages $200 million in St. Louis.
Other companies that dropped after saying profits will disappoint investors were Tekelec, a maker of phone network switches, casino operator Harrah's Entertainment Inc, software maker Interactive Intelligence Inc, and EXE Technologies Inc, a developer of supply-chain software.
Tekelec dropped US$6.73 to US$18.12, Harrah's slid US$6.15 to US$29.64, Interactive Intelligence declined US$1.72 to US$8.30, and EXE lost US$0.49 to US$4.41.
The companies in the S&P 500 are expected to report a 17.6 percent profit decline in the second quarter, according to analysts surveyed by First Call/Thomson Financial. When the quarter began, analysts predicted a decline of 6.4 percent.
Optimism that earnings will bounce back in the second half is dissipating as well. Analysts now see a drop of 6.7 percent in S&P 500 profits this quarter and growth of 4.8 percent in the last three months of the year; on April 1 they forecast profit growth of 1.6 percent and 12.6 percent respectively.
Van Leuven said 2002 earnings forecasts remain too optimistic. He predicts S&P 500 profits will rise 6 percent next year, rather than the 19 percent analysts expect.
He recommends investors buy energy stocks such as Anadarko Petroleum Corp. and Nabors Industries Inc. because earnings expectations are low and attainable.
Van Leuven also recommends food and beverage companies, whose earnings are less subject to the ups and downs of the economy.
Investors are taking that advice. Flowers Foods Inc, Interstate Bakeries Corp and Tasty Baking Co were among 107 US stocks touching their highest price in at least a year.
Electricity-producers rallied after Calpine Corp., the San Jose, California, independent power company, reached an agreement to collect past-due payments from bankrupt Pacific Gas and Electric and to continue selling power to the utility.
The settlement gives Calpine US$267 million in past-due receipts and lessens the possibility the company will have to take a charge against earnings for money owed by the utility.
Calpine rose US$5.26 to US$42.62 and was the biggest gainer in the S&P 500 Mirant Corp advanced US$1.11 to US$36.77, El Paso Corp rose US$0.76 to US$53.21, and Reliant Energy Inc added US$0.86 to US$32.40.
The Russell 2000 Index of small stocks fell 9.47, or 1.9 percent, to 483.26 and the Wilshire 5000 Total Market Index, the broadest measure of the US stock market, dropped 256.97, or 2.3 percent, to 11,059.56.
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