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Mixed Ending to Stocks' Rough Day

Kevin Burke

Stocks plunged at the open, and trading was choppy throughout the session Friday, but blue-chips closed well above their worst levels of the day and tech issues finished in positive territory.

The Dow Jones Industrial Average ended with a loss of 28.59 points, or 0.3%, to 9474.21. The Nasdaq rose 7.88 points, or 0.5%, to 1504.74, and the S&P 500 shed 2.29 points, or 0.2%, to 1007.27.

Stocks were hammered out of the gate by a disappointing reading on consumer sentiment, warnings from technology companies and another terrorist attack.

A suicide bomber drove a car packed with explosives into a guard post outside the U.S. consulate in Karachi, Pakistan, setting off an explosion that killed at least 11 Pakistani nationals. At least 51 people were reported injured by the blast. U.S. military forces have secured the consulate and its surrounding area.

On the economic front, U.S. industrial production rose a less-than-expected 0.2% in May, reflecting declines in automaking and utilities. But May's increase was the fifth straight monthly rise, the first time that's happened in almost two years. Capacity utilization ticked up to 75.5% from 75.4% in April, according to the report from the Federal Reserve.

A separate report from the Commerce Department showed that business inventories fell 0.2% in April, the 15th straight decline. The drop brought inventories to the lowest level in 2 1/2 years.

A surprisingly weak reading on consumer sentiment also contributed to the early selling frenzy. The University of Michigan's latest survey showed that the index has fallen to 90.8 this month from 96.9 in May. Analysts were expecting a slight decline, but only to 96.8. The present situations and consumer expectations components of the survey also tumbled.

The wireless communications sector was reeling after long distance company Sprint said its wireless unit Sprint PCS PCS won't meet its full-year subscriber growth target and is being forced to cut capital expenditures. The company expects the number of new subscribers to come in 10% to 15% lower than previous forecasts.

PCS sank 27% to $4.40. Sprint's other tracking stock, for the Phone Group FON, tanked 18% to $11.75.

Merrill Lynch downgraded Sprint PCS, Nextel NXTL, Triton PCS TPC and AT&T Wireless AWE.

J.P. Morgan cut its ratings on several companies in the wireless group, including some of those on Merrill's list, plus Alamosa APS, Leap Wireless LWIN and US Unwired UNWR.

Wireless technology developer Qualcomm QCOM fell 8% to $29.91 after Deutsche Securities lowered its investment rating on the stock to market perform in light of the Sprint news.

Publishing software maker Adobe Systems ADBE recorded a drop in second-quarter earnings after the close Thursday, but the company managed to beat analysts' expectations, citing the successful launch of a new version of its Photoshop software. Adobe did lower revenue guidance, though, sending shares down 13% to $31.37.

Genesis Microchip GNSS was one of the day's biggest percentage losers, plummeting 26% to $9.02 a day after sharply lowering its first-quarter revenue forecast to $41 million to $43 million from $60 million, citing an unexpected dropoff in orders.

Bucking the negative trend, however, was Sun Microsystems SUNW CEO Scott McNealy, who said at a technology conference Thursday that he remains confident his company will meet its fourth-quarter financial targets. Shares of Sun tacked on a penny to $6.14.

In the biotech sector, Biogen BGEN got a follow-up letter from the Food and Drug Administration about its psoriasis drug Amevive. The agency sought clarification on some of Biogen's clinical data and proposed postmarketing clinical trials to hone the treatment's safety profile, but the FDA didn't ask for new trials on the information the company has already provided. Biogen's rose 8% to $42.42.

U.S. Treasury issues were higher around 4 p.m. EDT. The 10-year note was up 24/32 to 100 18/32, yielding 4.80%. Shorter-term notes and the long bond were also ahead.

European markets dropped sharply. London's FTSE 100 was down 3% to 4631, and Germany's Xetra DAX dropped 3.7% to 4304. Japan's Nikkei 225 fell 2% to 10,921, and Hong Kong's Hang Seng closed down 1.5% to 10,956.