Data Dent the Dow

Stocks end lower as consumer sentiment is weaker than expected.
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Updated from 4:06 p.m. EDT

Stocks closed Friday's session with losses, amid a high-profile downgrade of

Intel

(INTC) - Get Report

, some negative earnings preannouncements and a fall in consumer sentiment.

After ending Thursday's session at its highest level in 11 months, the

Dow Jones Industrial Average

ended down 79.43 points, or 0.9%, at 9117.12. Meanwhile, the

Nasdaq

fell 27.13 points, or 1.6%, to 1626.49 and the

S&P 500

lost 9.90 points, or 1%, to 988.61. Friday's slide left the indices mixed on the week, with the Dow ending up 54.33 points, the Nasdaq losing less than a point and the S&P adding less than a point.

Even though sentiment has been decidedly bullish recently, markets are having trouble keeping up the momentum. The Dow is encountering resistance at 9215, which was an intraday high set last Friday. For much of this week, the Dow has hit that level, only to bounce back when support failed to hold above the key level.

"Absolutely, last Friday's reversal from a strong advance in the morning to a significant selloff in the afternoon is the key level to watch from short-term perspective," said Ken Tower, chief market strategist at CyberTrader. "The market's rallied quite strongly over the last two-and-a-half months, but the economy has to deliver here. It has to accelerate. People are looking to data to show evidence of improvement."

On Friday, data showed little improvement. The University of Michigan consumer sentiment index came in at 87.2, lower than the 93.1 expected by economists. Wholesale prices in the U.S. fell 0.3% in May, the fourth consecutive monthly decline, following a 1.9% drop in April. Lower energy and computer prices were the reason, a government report said. The core producer price index, excluding food and energy, rose 0.1% after a 0.9% drop in April.

"I'm surprised. I thought we'd get a decent rally after the consumer sentiment numbers came out. But that's the problem; they were much worse than expected," said Tower. "If they were close to expectations, the rally might have continued. People are looking for excuses to get back in."

Treasuries were higher, with the 10-year rallying 15/32, dropping its yield to 3.11%, one of the lowest levels in a half century.

Microprocessor giant Intel was downgraded to hold at Deutsche, which said the company is more likely to miss earnings estimates in the second half of 2003 than beat them. The brokerage said Intel has reached a price target of $22 and is due for "consolidation in the slow summer months." The shares fell 78 cents, or 3.5%, to $21.36.

Oracle

(ORCL) - Get Report

rose 15 cents, or 1.1%, to $13.48 after the company posted fiscal fourth-quarter earnings that beat estimates. The software maker also stood by its forecast for the current quarter.

But Oracle is facing opposition to its $5.1 billion hostile bid for

PeopleSoft

(PSFT)

, which formally rejected the offer Thursday, saying the offer undervalues the company and raises antitrust issues. Meanwhile, the company PeopleSoft is trying to acquire,

J.D. Edwards

(JDEC)

, sued Oracle to block its hostile bid, seeking $1.7 billion in compensatory damages and an unspecified amount in punitive damages. PeopleSoft dropped 45 cents, or 2.6%, to $16.92, while J.D. Edwards fell 33 cents, or 2.5%, to $13.03.

Elsewhere,

Adobe

(ADBE) - Get Report

expects earnings for the current quarter to be below analysts' expectations. Shares of the graphic-design software company fell $4.43, or 12.3%, to $31.55.

Also in the software arena,

Advent

(ADVS)

, which offers investment management services, said it is cutting 10% of its workforce in light of the continued softness in the financial industry. Shares dropped $1.26, or 6.9%, to $17.13.

Ameritrade

(AMTD) - Get Report

shares gained 10 cents, or 1.2%, to $8.23, after the company said third-quarter earnings would come in between 9 and 11 cents a share, topping the 7 cents expected by Wall Street. Revenue is expected to be between $173 million and $197 million, also beating estimates.

In other preannouncements,

USF

(USFC)

warned that second-quarter earnings would miss estimates due to slumping business activity, while

Illinois Tool

(ITW) - Get Report

narrowed its second-quarter earnings range. USF fell $1.77, or 6.2%, to $26.87, while Illinois Tool fell $1.28, or 1.9%, to $66.02.

Winnebago Industries

(WGO) - Get Report

slid $2.74, or 6.9%, to $37.16 after the company announced third-quarter earnings that missed estimates by 21 cents on revenue that was down 18.6% from the year-ago quarter.

AT&T

(T) - Get Report

fell 68 cents, or 3.2%, to $20.85 after a couple of negative analyst reports. Jefferies downgraded the company to underperform from hold, citing its lofty valuation. Goldman Sachs also expressed caution on AT&T shares, telling investors that demand for products hasn't picked up and that rumors of consolidation are likely to fade soon.

Analysts also were expressing caution on

AT&T Wireless

(AWE)

, with Bear Stearns noting that the company's business faces increased competition from

Verizon

(VZ) - Get Report

and T-Mobile, a unit of

Deutsche Telekom

(DT) - Get Report

. Shares of AT&T Wireless fell 7 cents, or 0.9%, to $7.50.

Rivals were the subject of commentary as well, with

BellSouth

(BLS)

and Verizon upgraded to outperform from underperform at Freidman Billings Ramsey based on better fundamentals. But Thomas Weisel Parters was expressing caution, downgrading Verizon to peer perform from underperform, and dropping BellSouth to underperform from peer perform. Verizon fell 57 cents, or 1.4%, to $39.22, while BellSouth dropped 47 cents, or 1.7%, to $26.59.

The

Securities and Exchange Commission

delivered Wells notices to two former executives at

Lucent Technologies

(LU)

, indicating they could face civil action related to their role in aggressive sales techniques in 2000. Lucent dropped 9 cents, or 4.1%, to $2.13.

Delphi

(DPH)

, a supplier of auto parts, fell $1.01, or 10.5%, to $8.58, after cutting its second-quarter earnings forecast because of weak auto sales. In other auto news,

General Motors

(GM) - Get Report

fell 93 cents, or 2.5%, to $36.19 after Moody's dropped its long-term debt rating to Baa1 from A3.

In the oil and energy space,

ExxonMobil

(XOM) - Get Report

was ordered by a court to pay $1.2 billion to 10,000 of its service-station operators for illegally overcharging them. Shares fell 27 cents, or 0.7%, to $37.93.

Elsewhere,

El Paso

(EP)

fell 57 cents, or 6.2%, to $8.65, while

ConocoPhillips

(COP) - Get Report

fell $1.13, or 2%, to $54.31 after A.G. Edwards downgraded both companies to sell from hold based on valuation concerns.

General Dynamics

(GD) - Get Report

fell $1.26, or 1.7%, to $72.01 after Merrill Lynch downgraded the company to neutral from buy, based on valuation.

Elsewhere in aerospace,

Northrop Grumman

(NOC) - Get Report

fell $1.48, or 1.7%, to $86.01 after guiding earnings estimates in line with expectations for fiscal 2003, 2004 and 2005.

Overseas markets were mixed, with London's FTSE 100 closing down 0.7% at 4134 and Germany's Xetra DAX ending down 1.6% at 3169. In Asia, Japan's Nikkei closed 0.7% higher at 8980, while Hong Kong's Hang Seng gained 1.2% to 9855.

On Thursday, the Dow ended up 13 points, or 0.2%, at 9196. The S&P 500 rose 1 point, or 0.1%, to 998, while the Nasdaq gained 8 points, or 0.5%, to 1653.