US stocks fell, driving the NASDAQ Composite Index to its biggest weekly decline since September, as disappointing sales reports from Microsoft Corp and IBM Corp damped optimism for an economic recovery.
"Companies such as Microsoft are essentially saying business is not showing signs of rebounding yet," said Marc Klee, who helps manage the US$900 million John Hancock Technology Fund.
The NASDAQ slid 55.48 on Friday, or 2.8 percent, to 1,930.34. Its 4.6 percent drop for the week was the biggest since the week trading resumed after the Sept. 11 terrorist attacks.
The Standard & Poor's 500 Index fell 11.30, or 1 percent, to 1,127.58. Chipmakers including Intel Corp joined software and computer companies to lead the decline. For the week, the S&P 500 lost 1.6 percent.
The Dow Jones Industrial Average shed 78.19, or 0.8 percent, to 9,771.85 on Friday and slid 2.2 percent this week.
Stocks rallied from Sept. 21 through the end of last year on expectations the economy would emerge from recession, boosting corporate profits as soon as the first half of this year. Those gains have eroded in the past two weeks as technology companies, in particular, have failed to provide evidence of a rebound.
Year to date, the Dow has dropped 2.5 percent, the S&P 500 has lost 1.8 percent and the NASDAQ has declined 1 percent.
About a quarter of the S&P 500 have presented fourth-quarter results, according to Thomson Financial/First Call. Combined with forecasts for companies that haven't yet reported, First Call projects earnings declined 22.3 percent in the quarter.
In the first quarter, profits are seen dropping 8.1 percent, according to analyst forecasts tracked by First Call. Profit growth resumes after that, reaching 39 percent in the fourth quarter, analysts forecast.
Some 1.3 billion shares traded on the New York Stock Exchange, 3 percent more than the three-month daily average. Three stocks fell for every two that rose on the Big Board, while two declined for every one that advanced on the NASDAQ Stock Market.
Exchanges will be closed Monday for the Martin Luther King holiday. Trading resumes Tuesday.
Microsoft declined US$3.76 to US$66.10, its biggest drop in three months, after saying its sales will miss analysts' targets. Chief Financial Officer John Connors said the company expects global personal computer shipments to fall in the first half of this year. Its shares rose 53 percent last year.
"Microsoft, and Intel earlier this week, are trying to rein in the enthusiasm" that drove the rally late last year, Klee said. Intel, the biggest maker of semiconductors, fell US$1.05 US$33.48. While it's 6.5 percent lower the past two weeks, Intel remains 73 percent above its Sept. 21 low. Hancock's Klee owns shares of Dell Computer Corp, the biggest direct-seller of personal computers, and Micron Technology Inc., the biggest US maker of computer memory chips.
Worldwide personal-computer shipments dropped last year for the first time since 1985 as the recession in the U.S. and market saturation slowed purchases, two research companies said.
Shipments declined 5.1 percent, according to market researcher IDC, while Dataquest Inc put the drop at 4.6 percent.
IBM had its biggest decline since July, falling US$5.65, or 4.7 percent, to US$114.25. The company said fourth-quarter sales declined 11 percent, missing analysts' forecasts by US$1 billion.
Other computer-related shares dropped. Dell lost US$0.85 to US$28.10 and Compaq Computer Corp gave up US$0.28 to US$11.52.
Hewlett-Packard Co, the biggest computer printer maker, fell US$0.92 to US$22.61.
Read-Rite Corp tumbled US$3.10, or 34 percent, to US$3.99. The maker of computer disk-drive parts said it expects a "significant decline" in revenue in its fiscal second quarter from the quarter ended Dec. 30.
ImClone Systems Inc fell US$8.93, or 30 percent, to US$21.15 after a congressional committee said it would investigate the company's research on the cancer drug Erbitux. The House Energy and Commerce Committee said in a press release that it is seeking records from ImClone related to its application for Food and Drug Administration approval of Erbitux.
ImClone has declined 71 percent from its Dec. 5 high. Bristol-Myers Squibb Co, which agreed in September to buy 20 percent of ImClone and co-develop Erbitux, fell US$0.75 to US$47.94.
Nortel Networks Corp, the second-biggest maker of phone equipment, retreated US$0.24 to US$7.50. Nortel said first-quarter sales will fall 10 percent, which implies about US$3.1 billion, below the US$3.36 billion forecast among analysts polled by First Call.
Cisco Systems Inc, the biggest maker of networking gear, fell US$0.63 to US$18.85.
Molex Inc declined US$1.20 to US$30.77.
The electronic-components maker said profit in the fiscal third quarter will be just over half of what analysts had been expecting.
Tyco International Ltd, the biggest maker of electronic connectors, rose US$1.23 to US$46.30, rebounding from a 7.9 percent decline. The company said it would meet with analysts on Tuesday to counter rumors the company blames for sending its stock lower.
Tyco shares have dropped 21 percent this year on concern its accounting methods prevented investors from fully understanding Tyco's earnings.
"We are up against the rumor du jour," Tyco's chief executive, Dennis Kozlowski, said yesterday.
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