Updated from 4:13 p.m. EDT
Tech stocks opened lower and were unable to ever mount a meaningful rally Friday, as unspectacular earnings from
back near its low for the year.
The tech-heavy index closed down 21.78 points, or 1.13%, to 1904.25, within 8 points of its 2004 low of 1896.
Dow Jones Industrial Average
barely stayed positive, adding 2.13 points, or 0.02%, to 10,012.87 on the day, remaining below its technically significant 200-day moving average of 10,021. The
dipped 0.78 points, or 0.07%, to 1095.66. The 10-year Treasury note rallied 18/32 to push its yield back down to 4.78%, while the dollar fell against the euro and climbed against the yen.
In light end-of-the-week trading, volume on the
New York Stock Exchange
came in at more than 1.3 billion shares, and advancers outnumbered decliners by about 5 to 4. On the Nasdaq, more than 1.5 billion shares changed hands, and decliners outpaced advancers by about 2 to 1.
"We have been approaching oversold levels, and I wouldn't be surprised to see a bounce heading into next week," said Robert Pavlik, portfolio manager at Oaktree Asset Management. "From a technical standpoint, prices are getting down to attractive levels. Yields are starting to pick up on a lot of equities to the point where you might want to start sticking your toe in a little bit, but I don't think the conviction is there across the entire Street."
Weighing on the technology sector, Dell closed down $1.16, or 3.2%, to $34.64 as investors couldn't muster any enthusiasm for its first quarter, in which earnings jumped 22% and revenue beat estimates. Dell's stock is one of the few major technology shares still in the green for 2004, so the computer maker's inability to beat estimates on the bottom line or significantly raise guidance was treated harshly.
Also, BEA Systems tumbled $2.45, or 22.7%, to $8.33 despite having posted a 3.6% jump in profits after Thursday's closing bell. Investors were troubled by a decline in software sales, and a host of analysts cut their ratings on the business-software maker Friday morning.
"These are two strong players, and now both of them are missing and lowering guidance," said Richard Williams, equity strategist at Garban Institutional Equities. "This was the quarter that we were supposed to see the big IT spending boom, and it really starts getting to the point where you have to ask, where is this tech boom? The government has shown us great numbers, but we haven't seen evidence of it when you look at all the big companies."
"If they're not growing meaningfully, something is wrong," he added. "And if you take the currency factor out of their most recent reports, you see that they're only growing in low-single digits."
On the Dow,
led gains, up 93 cents, or 1.9%, to $49.83 after an analyst at UBS upgraded the tobacco giant, arguing that the stock had reached attractive levels in the wake of recent losses that followed a legal decision that went against the company.
closed up $1, or 1.3%, to $75.66, and
rose the wave of high gas prices, gaining 46 cents, or 1%, to $43.19 after receiving several upgrades from analysts.
The session's mixed close ended a week marked by morning declines followed by afternoon rebounds. Most notably, stocks sank Wednesday to new intraday lows. The Nasdaq plummeted more than 2% to touch 1879 before staging a stunning turnaround after the S&P bounced off its 200-day moving average at 1078. The see-saw session ended with the Dow and the S&P positive while the Nasdaq was down only 0.3%.
Mark Arbeter, chief technical analyst at Stand & Poor's, said Wednesday's chart flow traced out a candlestick formation called a hammer, something many technicians argue is possible evidence that a low was put in place. Hammers are identified as having a small range between the open and close and an intraday low that is significantly below the open, high and close.
"Hammer formations take on more significance when they occur after a large decline and when they occur near an important support level," said Arbeter. "While the decline has not been too large so far, the hammer did occur right near the lows we saw in March. While no formation is perfect, we did see this pattern at some important lows (set by the stock market in the last 10 years)."
Before Wednesday's shocker, all three major indices set new closing levels for the year on Monday, amid widespread revulsion towards the prisoner abuse scandal that has marred the U.S.-led occupation of Iraq and lingering concerns about inflation and rising interest rates. The Dow ended at 9990, the S&P closed at 1087 and the Nasdaq was down to 1896.
Investors spent much of the week waiting for more checks on inflation from data like Friday's perplexing consumer price index and Thursday's producer price index, which rose by 0.7% in April, beating consensus estimates and the previous month's reading of 0.5%.
In the end, all three major stock indices suffered losses for the third week in a row, while the Dow extended its losing streak to four weeks. The blue-chip average dropped 1%, the S&P lost 0.3%, and the Nasdaq was down 0.7%.
On Friday, the consumer price index posted its lowest reading in four months, rising 0.2% in April. That data could temper the recent concerns in the market about inflation, but excluding food and energy prices, the core index came in higher, at 0.3%. Paul Mendelsohn, chief market strategist at Windham Financial, said he expected the core CPI reading to come in where it did, but he was baffled by the fact that it was higher than the overall reading, given the recent uptick in gasoline prices.
"I think people, like myself, are just going to scratch their heads and say this doesn't make any sense, and I would suspect the figure will either be revised next month, or the next month is going to make up for the higher gas and energy prices that are not flowing through to this report," he said. "The market is looking six to eight months forward as it always does, and I'm not sure it likes what it sees out there."
"Given where we are on gasoline inventories at this point in time, I'm really concerned as to whether we have enough to get through the summer at these levels of demand, particularly if there's a shock out there," he added.
Oil futures trading on the Nymex hit new highs again, reaching $41.37 a barrel, as concerns about oil supplies in the context of burgeoning unrest in the Middle East continued to push the price up in the face of high demand around the globe.
On the geopolitical front, U.S. tanks rolled into the Iraqi city of Najaf and shelled positions held by fighters loyal to a radical cleric, Muqtada al Sadr, who condemned the U.S. and Britain in a sermon, according to the
. In Karbala, residents reported explosions and gunfire as U.S. soldiers and Mr. Sadr's militamen clashed. Shops closed and residents stayed off the streets.
Also, nearly 300 Iraqi detainees were released from the Abu Ghraib prison on Friday, a day after Defense Secretary Donald H. Rumsfeld made a surprise visit and insisted the Pentagon did not try to cover up abuses there.
Also on the economic front, industrial production jumped 0.8% in April, beating Wall Street's consensus estimate of 0.5%, after falling the month before by a revised 0.1%. Factories operated at 76.9% of capacity, according to the
, up from last month's 76.5%.
Growth cooled in business inventories in March, from 0.8% to 0.7%, but the figure was higher than the expected 0.4% increase. Also, the University of Michigan said the preliminary reading of its consumer sentiment index for May stayed flat at 94.2 after economists predicted it would rise to 96.
In other corporate news, shares of
dropped 23 cents, or 6%, to $3.57 after the telecommunications company received a federal grand jury subpoena to produce documents, including financial statements and corporate, personnel and accounting records, for the periods from Jan. 1, 2000, to the present. News of the probe comes two weeks after Nortel fired Chief Executive Frank Dunn, Chief Financial Officer Douglas Beatty and controller Michael Gollogly. At that time, the company said it would again have to restate earnings for the past year.
Overseas stocks were broadly lower, with London's FTSE 100 closing down 0.3% to 4442 and Germany's Xetra DAX off 0.6% to 3803. In Asia, Japan's Nikkei rose 0.2% to 10,850, while Hong Kong's Hang Seng fell 1.1% to 11,279.
Next week will kick off with first-quarter results before Monday's opening bell. On an operating basis,
is expected to report earnings of 13 cents a share, up from last year's 9 cents a share;
is expected to beat last year's results by a penny, posting profits of 54 cents a share; and
Toys R Us
is expected to report a loss of 1 cent a share, better than last year's loss of 3 cents a share.
No major economic releases are slated for Monday.