Rally fizzles on bad news
and profit taking

---

By Amy Baldwin
Associated Press

NEW YORK >> Wall Street tried to extend its huge rally today but failed amid concerns about a slump in the semiconductor industry. Another accounting investigation, this time at AOL Time Warner, also reminded investors of their misgivings about corporate ethics.

The Dow Jones industrials fluctuated widely, while the tech sector was lower for the entire session, and the Nasdaq composite index gave up most of its gain from yesterday.

The downturn wasn't surprising in a market still uneasy after nine weeks of declines that claimed a quarter of the market's value. And analysts were encouraged that the market did not fall harder.

"After such a huge rally, you have to expect the market to vacillate over the next few days. The reason for that is the question of capitulation is still unanswered -- whether we have reached the bottom or not," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. "It is going to take time to reverse negative market sentiment and restore confidence back to the marketplace."

Decliners led advancers more than 8 to 7 on the New York Stock Exchange. Volume was moderate. The Dow closed down 4.98, or 0.1 percent, at 8,186.31, according to preliminary calculations. Earlier it rose and fell as much as 118 points earlier.

Yesterday, the Dow spiked nearly 490 points following the arrest of Adelphia Communications executives for allegedly stealing from the cable TV company and an agreement between House and Senate negotiators on legislation to create tougher penalties for corporate fraud.

The broader market was also down. The Nasdaq composite index fell 50.14, or 3.9 percent, to 1,240.09, after a 61-point surge yesterday. Decliners outnumbered advancers nearly 6 to 5. The Standard & Poor's 500 index fell 4.75, or 0.6 percent, to 838.68, following a 45-point gain the previous session. The Russell 2000 index fell 0.50, or 0.2 percent, to 378.06.

The price of the Treasury's 10-year note was up 3/4 point today, while its yield fell to 4.39 percent from 4.47 percent late yesterday. Two-year Treasury notes were up 5/32 point and yielded 2.20 percent, down from 2.34 percent yesterday.

Many analysts believe yesterday's rally was the kind of snapback the market needed after more than two months of declines that saw most stocks fall back to levels not seen since 1997.

"We have had a huge bounce, but it is going to take some time for the market to work through this tremendous volatility," said Scott Bleier, president of Hybridinvestors.com.

Bleier said he expects the market to endure more downturns but said most of the damage is over, and that the market has greater upside potential.

"It might be a time when investors can invest in stocks again because they are reasonably priced, rather than buy stocks simply because they are going up. That has been difficult to do, because stocks were so expensive."

The tech sector was hurt by chip stocks after Taiwan Semiconductor said while second-quarter profits rose sharply, it expects weaker demand in the third quarter. Taiwan Semiconductor fell $2.16 to $8.98.

Chip maker Intel fell 85 cents to $17.85, and chip equipment maker Applied Material tumbled $1.96 to $14.59.

Investors were disheartened by a drop in orders to U.S. factories for big-ticket items. The Commerce Department reported that orders fell 3.8 percent in June, well short of the 0.5 percent increase that analysts were expecting.

Overseas, Japan's Nikkei stock average finished Thursday off 0.2 percent. In Europe, France's CAC-40 rose 4.2 percent, Britain's FTSE 100 soared 5 percent, and Germany's DAX index fell 3.1 percent.