US stocks fell after Microsoft Corp said profit will trail forecasts this quarter and Gateway Inc cut its earnings estimates for the rest of the year.
PMC-Sierra Inc led a decline in semiconductor shares after the maker of telecommunications chips projected lower third-quarter sales and a wider loss.
"People were hopeful companies, especially technology companies, would say something positive about the third quarter, and we haven't seen that," said Mark Bronzo, who helps manage US$4.5 billion at Groupama Asset Management. "People are frustrated."
The NASDAQ Composite Index shed 17.22, or 0.8 percent, to 2,029.37. The Standard & Poor's 500 Index fell 4.17, or 0.3 percent, to 1,210.85. The Dow Jones Industrial Average slipped 33.35, or 0.3 percent, to 10,576.65. Microsoft led the declines in all three benchmarks.
For the week, the NASDAQ declined 2.7 percent and the S&P 500 lost 0.4 percent. The Dow climbed 0.4 percent. Stocks bounced between gains and losses during the week as disappointing earnings from companies such as AOL Time Warner Inc alternated with more-optimistic announcements from Broadcom Corp and other companies.
Stocks pared early losses as investors speculated that profits will rebound in the fourth quarter because the Federal Reserve has cut interest-rates six times this year, energy costs have fallen and the government is mailing tax-rebate checks to taxpayers.
"We're a few months away from a real, sustainable rally," said Bronzo, who's been buying Gap Inc, Tyco International Ltd and Merrill Lynch & Co shares.
Some 118 members of the S&P 500 have reduced profit forecasts for the third quarter, forcing analysts to trim estimates for this year, according to First Call/Thomson Financial. Analysts expect S&P 500 companies to report profit growth of 2.4 percent in the fourth quarter, compared with the 12.6 percent they predicted at the end of March, according to First Call.
At the same point in the second quarter, about 110 companies had reduced forecasts, First Call said. Companies reporting quarterly results next week include McDonald's Corp, SBC Communications Inc, Exxon Mobil Corp, Texas Instruments Inc and Compaq Computer Corp.
Eight stocks fell for every seven that rose on the NASDAQ Stock Market, while advancing and declining shares were about even on the New York Stock Exchange. Some 1.1 billion shares traded on the Big Board, in line with the three-month daily average.
Microsoft dropped US$3.39 to US$69.18, its biggest drop in four months. The world's biggest software maker said lagging personal-computer demand has hurt sales of its Windows operating system.
Microsoft, the best-performing stock in the Dow this year, gets about two-thirds of its revenue from PC programs.
Apple Computer Inc and Gateway Inc have struggled to maintain profits as consumers and corporations buy fewer computers.
Gateway dropped US$3.60 to US$10.99, its biggest loss in almost eight months. The No. 2 direct seller of PCs lowered its profit forecast for the rest of the year amid slowing demand.
The company reported a wider second-quarter loss than analysts predicted.
Gateway and other PC makers have slashed prices to maintain market share as consumers buy fewer computers.
PMC-Sierra tumbled US$4.07, or 13 percent, to US$27.24. The communications semiconductor maker is booking fewer orders from customers, which include Cisco Systems Inc and Lucent Technologies Inc, as companies scale back their spending.
Vitesse Semiconductor Corp lost US$0.73 to US$17.94. The maker of chips for fiber-optic networking equipment said third-quarter revenue fell 47 percent.
Xilinx Inc slipped US$2.97 to US$37.90.
The biggest maker of programmable logic chips said sales dropped 80 percent as Internet and telecommunications gear makers trimmed spending.
Scientific-Atlanta Inc plummeted US$12.28, or 35 percent, to US$22.80. The maker of cable-television set-top boxes reduced fiscal-fourth quarter and 2002 earnings forecasts because sales have slipped. The company reported fiscal first-quarter profit that fell short of estimates.
Nortel Networks Corp declined US$0.21 to US$7.54 after it pre-dicted spending on telecommunications gear won't recover until the second half of 2002. The biggest maker of telecom equipment said second-quarter sales fell 36 percent on slowing demand for phone equipment. It declined to forecast results for the third quarter.
Nortel shares have lost three-fourths of their value this year.
Rival Altera Corp fell US$1.31 to US$29.34.
Commerce One Inc slid US$0.86 to US$4.03 after the software maker reported a second-quarter loss that widened about 50-fold, missing analysts' estimates. The company said revenue will be unchanged this quarter from a year ago and will start rising in the last three months of the year.
DaimlerChrysler AG climbed US$0.97 to US$50.15. The fifth-largest carmaker reported a second-quarter profit, boosted by higher sales of Mercedes-Benz cars and cost cutting at its unprofitable Chrysler unit.
EBay Inc gained US$2.40 to US$66.80. The Internet auctioneer said second-quarter profit more than tripled. Excluding stock- based pay and non-cash items, earnings topped forecasts for a seventh straight quarter.
Sun Microsystems Inc rose US$0.59 to US$15.03 and was the most-active stock with 76.2 million shares trading. The maker of server computers reported a fiscal fourth-quarter loss, excluding acquisition-related costs of US$0.04 a share, topping analysts' already reduced estimates by a penny.
"Beating reduced expectations isn't exactly very positive," said Jackie Bowie, a manager at Aegon NV's UK fund-management unit, which oversees ?2.5 billion in US stocks.
Bowie has recently been adding to his position in Sun.
Network Associates Inc jumped US$2.01, or 18 percent, to US$13.30. The maker of McAfee security software said its loss this year will be narrower than forecast.
Oil companies gained after members of the OPEC said they will likely cut production amid slumping demand.
Texaco Inc gained US$1.55 to US$67.05, Chevron Corp advanced US$1.80 to US$88.95 and Exxon Mobil rose US$0.28 to US$43.36.
The AMEX Oil index climbed 1.8 percent and the group was among the best performers in the S&P 500.
The Russell 2000 Index of smaller stocks eked out a gain of 0.39, or 0.1 percent, to 487.93.
The Wilshire 5000 Total Market Index, the broadest measure of US shares, declined 33.15, or 0.3 percent, to 11,212.37.
The market value of US stocks dropped US$38.1 billion.
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