NEW YORK >> Amid fresh reminders that companies are still struggling in a weak economy, investors took profits today, locking in gains following the stock market's two-week rally.
Profit-taking,By Amy Baldwin
Among the big decliners were companies that released disappointing earnings and acknowledged that the future will be challenging, and companies that were downgraded by brokerages. However, analysts had expected a pullback after the Dow industrials and Nasdaq composite index ended last week with triple-digit advances, even preferring that prices not run up too quickly.
"Actually, it is healthy if the market backs and fills, rather than going up like there is no tomorrow," said Dan Ascani, president and research director at Global Market Strategists in Gainesville, Ga.
The Dow fell 47.62 to 10,532.23. The blue chips sacrificed a small portion of the 452 points they picked up last week when several companies posted better-than-expected earnings and the Federal Reserve cut interest rates for the fourth time this year.
The Nasdaq composite index fell 104.09 to 2,059.32, losing more than half of last week's 201-point advance. However, the index has gained strength recently, recovering nearly 26 percent from its low close for the year of 1,638.80, reached April 4. The Standard & Poor's 500 fell 18.62 to 1,224.36.
Decliners beat advancers 3 to 2 on the New York Stock Exchange , with 1,824 down, 1,259 up and 217 unchanged. Volume was 1.2 billion vs. 1.3 billion Friday. The NYSE composite index fell 4.58 to 618.77, the American Stock Exchange composite index gained 4.73 to 903.54 and the Russell 2000 index fell 5.64 to 461.07. The Treasury's 10-year note rose 22/32 to 98 17/32; its yield fell 9 basis points to 5.19 percent. The 30-year bond gained 7/8 to 94 30/32; its yield fell 7 basis points to 5.73 percent.
Companies with negative earnings news traded lower today. T. Rowe Price fell $1.59 to finish at $34.76 after the investment firm said its first-quarter profit dropped 34.5 percent from last year. Network equipment maker Sun Microsystems tumbled $2.14 to $17.57 on disappointing growth of 2.2 percent for its fiscal third quarter. The company also said demand continues to wane and that it doesn't see business improving in the near term.
Analysts' downgrades also weighed on the tech sector.
Software maker Oracle fell $2.60 to $17.15 after Lehman Brother reduced its rating on the stock and warned of a weak fourth quarter for the company.
Semiconductor stocks fell after Merrill Lynch downgraded many companies, including PMC-Sierra and Intel. PMC-Sierra plunged $6.05 to $38.76. Intel, which rose sharply last week on better-than-anticipated earnings and an announcement that sales have stabilized, dropped $2.11 to $30.32.
According to a research letter by Merrill Lynch analyst Joseph Osha, the semiconductor sector is overvalued, up 36 percent in the past two weeks. The letter also states: "We would also add that there is no identifiable evidence that the semiconductor recovery is closer at hand."
Noting the recent gain in the tech sector, analysts weren't surprised stocks fell. "The tech stocks have moved ahead quite significantly, but let's face it, people have been hurt so badly and lost so much money by the decline that there is a natural tendency to take profits," said Jack Shaughnessy, strategist for Advest Inc. in Hartford, Conn.