US stocks fell for the first day in three after manufacturing and jobs reports signaled the economy and corporate profits may take longer to recover than expected.
Microsoft Corp and Citigroup Inc led the decline.
"The earnings weren't great in the fourth quarter and, [forecasts] are not as good as people hoped for," said Martin Yokosawa, who oversees US$250 million at Oberweis Asset Management Inc. "While things will get better later in the year, the market got ahead of itself."
Waste Management Inc dropped after the largest waste hauler's fourth-quarter profit missed estimates and on speculation its accounting didn't accurately reflect results. Tyco International Ltd and American International Group Inc dragged the Standard & Poor's 500 Index lower for the week on concern their accounting practices have misled investors.
The S&P 500 fell 8 points, or 0.7 percent, to 1,122.20. The NASDAQ Composite Index dropped 22.79, or 1.2 percent, to 1,911.24. The Dow Jones Industrial Average lost 12.74, or 0.1 percent, to 9,907.26.
The S&P 500 had its third weekly decline in four, shedding 1 percent, as the collapse of energy trader Enron Corp damped investor confidence in companies that have grown through acquisitions such as General Electric Co and Williams Cos.
The NASDAQ dropped 1.4 percent for the week, while the Dow climbed 0.7 percent.
"There continue to be worries about the transparency of public corporations," said Eric Barden, who helps manage US$50 million in smaller stocks at First Austin Capital Management in Austin, Texas.
Today's reports that showed manufacturing improved less than predicted and the economy lost more jobs than forecast blunted a statement earlier this week by the Federal Reserve that the economy is starting to recover.
Job cuts announced on Friday by companies including General Motors Corp, Ford Motor Co, Amtrak and Dow Corning Corp. may hurt confidence and limit consumer spending, which accounts for two-thirds of the economy.
While the S&P 500 lost 1.6 percent last month, some investors said the declines weren't enough to reflect the slump in corporate profits. With about 70 percent of the S&P 500 companies reporting, earnings fell 24 percent in the fourth quarter, according to Thomson Financial/First Call.
Analysts expect profits to drop 7.7 percent this quarter, compared with the 6.2 percent decline they projected on Jan. 1, First Call said.
"Many stocks are still expensive on a price-to-earnings basis," even after benchmark indexes' first monthly decline since September, said Robert Armknecht, manager of the US$1.5 billion Galaxy Growth Fund. "As fast as prices came down, earnings came down faster."
More than 1.3 billion shares traded on the New York Stock Exchange, 5.2 percent more than the three-month daily average.
Four stocks fell for every three that rose on the NASDAQ Stock Market, while nine declined for every eight that advanced on the Big Board.
Waste Management fell US$3.69, or 13 percent, to US$25.13, its biggest decline in 2 1/2 years. North America's largest trash hauler said it earned US$0.30 to US$0.31 a share, including gains, last quarter because of the slowdown in the economy.
TMP Worldwide Inc dropped US$4.36 to US$38.21 after Forbes magazine reported that the owner of the Monster.com website skims over mergers-and-acquisitions expenses to make financial results look better.
The company demanded a correction, calling the reporting ``inaccurate and irresponsible.''
Investor concern that companies have masked slowing profit growth or concealed losses sent shares of Tyco down 18 percent and American International Group down 6.1 percent this week.
Financial shares led the S&P 500's decline.
Morgan Stanley Dean Witter & Co fell US$1.59 to US$53.41. The second-biggest securities firm's Japan unit received a five-week ban from trading stocks for its own account for violating securities regulations.
JP Morgan Chase & Co fell US$1.89 to US$32.16, and Citigroup slid US$0.91 to US$46.49.
Viacom Inc slid US$1.53 to US$38.40 as investors speculated that President Mel Karmazin will leave the third-largest media company next year because of a disagreement with Chief Executive Officer Sumner Redstone. Shares have dropped 30 percent the past year on slowing profit growth and speculation the two executives were feuding.
Microsoft, the world's largest software maker, dropped US$1.05 to US$62.66.
WorldCom Inc dropped US$0.44 to US$9.61 and was the most-active stock with 74 million shares trading. Chief Executive Bernard Ebbers may have to repay as much as US$183.7 million in loans backed by 11.3 million in WorldCom shares after the stock hit a seven-year low of US$9.85 on Wednesday.
Adobe Systems Inc rose US$2.23 to US$35.93. The maker of Photoshop photo-editing software maintained its first-quarter profit forecast for this year.
Computer Sciences Corp rose US$1.80 to US$46.30. The third-biggest US computer-services company said fiscal third-quarter profit rose as it cut costs and gained more business managing corporate and government computer systems.
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