Nasdaq Continues Slide at Midday

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Updated from 11:51 a.m. EDT

The Nasdaq Composite Index was continuing to decline as investors took some of their profits from yesterday's gains. The tech laden index was sliding 30.53 to 4033.48, while the Dow Jones Industrial Average was coming off of its earlier lows, now down 62.58 to 10,435.16. Across the board stocks were lower today, with earnings and interest rate fears looming over the market.

Lately, the broad S&P 500 was losing 18 to 1461, while the small cap Russell 2000 skidded 2 to 526.

Major Indices INDEX CHANGE % VALUE Dow 62.58 -0.62% 10,435.16 S&P 500 16.59 -1.12% 1462.54 Nasdaq 30.53 -0.75% 4033.48 Russell 2000 1.66 -0.32% 525.91 TSC Internet 3.8 -0.41% 911.50 NOTE CHANGE PRICE YIELD 10-Year Treasury 1/32 102 26/32 6.111%

"Everybody is on Fed watch," said Jim Maguire, Jr., managing director at LaBranche . "The consensus is that the Fed won't raise rates this time around, but we'll probably see a slowdown next week ahead of the meeting. That, combined with summer doldrums could make for a very uninteresting tape."

The oil service sector began to fall out of investors' favor after trading higher in earlier in the session. The Philadelphia Stock Exchange Oil Service Index fell 1.6, or 1.2%, to 125. Transocean Offshore Drilling (RIG) was lifting 11/16, or 1.3%, to 54 11/16, after hitting a new 52-week high during early morning trading.

The oils were also losing ground after OPEC announced its would boost its output by 708,000 barrels a day. An increase in supply would dampen the steep oil prices, which pushed last quarter's corporate earnings higher. The American Stock Exchange Oil & Gas Index was slipping 7, or 1.3%, to 528. Dow component Exxon Mobil (XOM) was off 1.5%, while Chevron(CHV) was falling 1.5%.

Big industrial names continued to stumble, on concerns of a slowing economy. Dow components Honeywell (HON) and United Technologies (UTX) were both lower.

The interest-rate-sensitive financial stocks were weaker today, after Merrill Lynch analyst Judah Kraushaar cut his earnings estimates on PaineWebber(PWJ). The American Stock Exchange Broker Dealer Index was off 1.6%. In recent weeks, the sector has been take down as investors returned to the Nasdaq. Like Kraushaar, many Wall Street analysts have voiced concerns about how the slowing economy and interest rates will impact financials' earnings.

Despite these concerns, Morgan Stanley Dean Witter(MWD) pulled through with better-than-expected earnings. But even the good news couldn't keep the stock up. Morgan Stanley slipped 2 3/16, or 2.6%, to 83 7/16.

"Morgan Stanley Dean Witter's good results could boost financials. At this point we're more worried about financials. I want to see these stocks get some strength. I want to see something more than technology and energy stocks act better. Technology has been up for five days straight," said Todd Clark, head of listed trading at WR Hambrecht.

Analog chipmaker Burr-Brown(BBRC) was flying 30 5/8, or 42.3%, to 103 3/8. The gain comes after Texas Instruments(TXN) announced plans to acquire the company for $7.6 billion in stock. Investors were less enthusiastic about Texas Instruments, which was lately fairly flat, trading up 1/4, or 0.30%, to 82 1/4.

The weekly jobless claims report, rarely a market-moving number, was released at 8:30 a.m. EDT. Claims for the week of June 17 rose to 302,000, just barely above Reuters' consensus estimates of 289,000 and a little higher than the revised 297,000 for the previous week. The four-week average hit its highest point since the week of July 17, 1999.

The upcoming FOMC meeting on June 27-28 was still haunting the stock market today. Although cool May data reports have most of the market convinced the Fed won't raise interest rates this time around, Greenspan will almost definitely issue a few hazy words on his outlook for the coming months.

"This market has been stuck in a trading range and it looks like we're going to continue banging around in that range," Clark said.

The big questions now are how much of the recent run-up is a pre-emptive rally, factoring in the likelihood that the Fed will hold interest rates steady this month, whether a slowing economy is going to slow corporate earnings and which matters more for the broader market.

Whether or not tech continues upward today may depend on Microsoft's(MSFT) performance. This stock was given credit for much of the Nasdaq's rise yesterday. Microsoft jumped 7.7% after Judge Thomas Penfield Jackson froze a set of tough restrictions on the company's operations while its antitrust appeal is pending. Microsoft was recently up slightly, 0.7%, to 81 1/4.

Of course, the fact that the Nasdaq was able to hold its head above the psychologically key threshold of 4000 for the second-consecutive session this week hasn't hurt sentiment. Some say this bodes well for continuing strength on the Nasdaq.

"People will be watching to see if Microsoft can hold onto yesterday's gains," Clark said.

Lately, TheStreet.com Internet Index was skidding 4, or 0.42%, to 912, with Yahoo(YHOO) continuing to sell off after Lehman Brothers rolled coverage with a neutral rating. Today, the revered Merrill Lynch analyst Henry Blodgett defended the stock's buy rating, saying it was considered a core holding. Yahoo was falling 4%.

Market Internals

Breadth was negative on both the Nasdaq and the NYSE on moderate volume.

New York Stock Exchange : 1,004 advancers, 1,620 decliners, 511 million shares. 34 new 52-week highs, 50 new lows.

Nasdaq Stock Market : 1,682 advancers, 1,925 decliners, 835 million shares. 63 new highs, 37 new lows.

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Most Active Stocks

NYSE Most Actives

• Texas Instruments (TXN): 8 million shares.

• Compaq (CPQ): 1.6 million shares.

• Nokia (NOK): 7.3 million shares.

Nasdaq Most Actives

• Microsoft (MSFT): 19.9 million shares.

• Ericsson (ERICY): 14.1 million shares.

• Red Hat (RHAT): 11.9 million shares.

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Sector Watch

The Morgan Stanley Cyclical Index was off 0.6%.

Drug stocks, which showed strength in the face of tech decline, slipped today, with the American Stock Exchange Pharmaceutical Index down 1.9%. Earlier today, Deutsche Banc Alex Brown sliced its rating on American Home Products (AHP)to buy from strong buy. The shares were sliding 2.6%.

In tech news, The Philadelphia Stock Exchange Semiconductor Index was cooling off after yesterday's red-hot run, down 1.9%. Micron Technologies(MU) which is set to report earnings after the bell, was losing 4.5%.

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Bonds/Economy

Treasuries were mostly higher on little news ahead of today's buyback of long-maturity issues.

In the only economic news of the day, initial jobless claims fell from last week's eight-month high of 312,000 to 296,000, indicating a slight tightening of labor-market conditions.

In today's buyback, the Treasury Department will accept offers from dealers of up to $2 billion of securities maturing between February 2015 and August 2019. The department is using federal government surplus funds to pay down debt by buying back Treasury securities.

The benchmark 10-year Treasury note lately was up 1/32 at 102 26/32, trimming its yield to 6.111%.

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International

European markets closed down.

The Paris CAC was down 15.88, or 0.24%, to 6474.88, while Frankfurt's Xetra Dax was coming off its lows, down 49.39, or 0.70%, to 7050.70.

Across the channel, London's FTSE was off 64, or 0.99%, to 6413.80.

The euro was lately trading down at $0.9524.

Asian markets were mixed overnight in a reversal of yesterday's moves, with Tokyo and Hong Kong lower, and Korea and Taiwan closing up on the session.

Despite a strong start to the day in Tokyo, a bulk sale in September Topix futures during the last minute of trading left markets slightly lower than Wednesday's close. The Nikkei 225 index fell 104.07 points to 17,106.01, while the Topix index, which includes all shares listed on the Tokyo Stock Exchange's first section, shed 8.32 to 1575.63.

In Tokyo currency trading, the greenback was slightly weaker, fetching 105.23 yen. The dollar was recently trading 105.36 yen.

Hong Kong's Hang Seng index shed 285.78 points, or 1.8%, to 15,952.36, dragged down by weak bank and property shares.

And Korea's Kospi index gained 0.37 to 782.24, while Taiwan's TWSE index rose 134.17, or 1.6%, to 8771.77.

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