Heading into the long Labor Day holiday weekend, US stocks slipped in very thin trading amid a fall in technology issues while Treasuries, the dollar and oil prices rose on Friday.
Tech stocks sank under the weight of a downbeat outlook from bellwether Sun Microsystems and the broad market snapped a five-week winning streak in a pre-holiday week full of gloomy forecasts from corporate America and downbeat comments from Wall Street analysts.
"There's a growing sense that technology is going to take even longer to turn on the earnings front, so investors are shipping money out of that group," said Owen Fitzpatrick, head of the US equity group at Deutsche Bank Private Banking.
The rise in US Treasuries on a shortened trading day was attributed to renewed safe-haven flows, erasing losses in the wake of Chicago-area manufacturing data that suggested the sector remains on track for a recovery.
"I think primarily it's because it's a short session with a long holiday weekend here, so there's a big sentiment toward risk aversion in this time period. Guys don't really want to take a lot of risk home here," said Ken Logan, market analyst at Thompson/IFR.
The stock markets, particularly blue chips, got an early boost from data showing expansion in manufacturing and stabilization of consumer sentiment. These reports eased worries that the economy's rebound from recession has stalled and could stunt corporate profits.
Investors were quick to cash out after the market's strong run in recent weeks, bracing for the possibility of more bad news on the earnings front after having their hopes for improvement in corporate profits dashed repeatedly.
The blue-chip Dow Jones industrial average ended with a loss of 7.49 points, or 0.09 percent, at 8,663.50. The broad Standard & Poor's 500 index sagged 1.73 points, or 0.19 percent, to 916.07, while the NASDAQ Composite fell 20.92 points, or 1.6 percent, to 1,314.85.
Volumes on the last trading day of the month were among the thinnest of the year, with many investors already on vacation and others heading out early. Wall Street is shut tomorrow for the holiday.
Sun was down 14 cents at US$3.69, the most actively traded issue on NASDAQ. Sun Microsystems' chief financial officer cut the computer maker's revenue outlook for the September quarter and said corporate spending on technology may be weakening.
Other computer-related tech shares felt a pinch from the Sun news. Web gear maker Cisco Systems was down US$0.38 at US$13.82 and top chip maker Intel Corp was off US$0.47 at US$16.67. Among software companies, Microsoft Corp. was off US$1.50 at US$49.08 and Oracle Corp lost US$0.37 at US$9.59.
Another warning came from BellSouth Corp, the No. 3 US local telephone company, which said earnings for the year will fall below expectations due to a restructuring and weak sales in its wireless business as well as the turbulent economy.
Shares of BellSouth lost US$0.93, or 4 percent, to US$23.32. SBC Communications Inc, BellSouth's partner in the wireless joint venture Cingular Wireless, saw its stock drop US$1.06, or 4 percent, to US$24.74.
BellSouth's warning comes only five weeks after the company last revised its outlook on July 22, "highlighting the speed at which business conditions have apparently deteriorated," Merrill Lynch analyst Adam Quinton said.
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