The plunging tech sector pulled the rest of Wall Street lower Friday, giving the stock market a dismal end to a difficult week and the Nasdaq composite index its biggest weekly decline in two years.
The Dow Jones industrial average slid 46.70 points, to 10,225.57. The Standard & Poor’s 500 index lost 6.59, to 1107.30. The tech-heavy Nasdaq shed 38.63, or 2 percent, to 1920.15.
The Nasdaq tumbled 6.3 percent for the week, its steepest decline since the week ended April 26, 2002. The index, which gets 39 percent of its value from computer-related companies, also completed its worst month since December 2002, sliding 3.7 percent.
For the week, the Dow shed 2.4 percent, and the S&P 500 fell 2.9 percent. The S&P 500 lost 1.7 percent in April, resulting in its first back-to-back monthly drops since January and February 2003. The Dow slipped 1.3 percent for the month.
An index of technology shares fell 2.1 percent, the biggest drop among the 10 S&P 500 industry groups. The group fell 7.3 percent over the past five days, also more than any other industry group. Computer-related stocks led last year’s rally.
Their decline is “due to the sense that the market has peaked, and higher interest rates are going to slow the economy down,” said Jay Suskind, head of equity trading at Ryan Beck & Co. in Livingston, N.J.
Cisco Systems, the world’s largest maker of computer-networking gear, lost $1, to $20.91. Gateway tumbled 49 cents, or 9.2 percent, to $4.82, after it reported a wider first-quarter loss late Thursday and said it would cut 1,500 jobs.
Yahoo and other Web-search companies fell on concern shareholders will shift money into Google, the most-used search site, which filed for an initial public offering on Thursday.
Yahoo dropped $4.18, or 7.6 percent, to $50.53, bringing its three-day drop to 12 percent. Ask Jeeves shed $3.38, or 8.7 percent, to $35.37. Infospace lost $2.71, or 7.6 percent, to $32.91.
Selling in tech stocks started early in the day and intensified as the session wore on. Jim Russell, director of core equity strategy for Fifth Third Asset Management in Cincinnati, attributed the slide to investors who appeared to be “cashing in a few chips where they’ve made the most money.”
Blue-chip stocks surrendered moderate gains, as fears of higher interest rates again prompted investors to overlook strong earnings, this time from ChevronTexaco and Procter & Gamble.
Kevin Caron, market strategist at Ryan, Beck & Co., said investors were overreacting to the possibility of rate hikes.
“The rash of data over the last month suggests the Fed will move sooner rather than later, so the market gets nervous,” Caron said. “But, ultimately, it is the earnings that drive stock prices, not what the Fed does. And the longer-term prospects are for strong economic growth, higher earnings and better stock prices.”
In the first quarter, profits for S&P 500 companies climbed 27 percent, based on results for the 410 that have reported and estimates for the rest, according to Thomson First Call. That’s more than double the 13.4 percent forecast on Jan. 1.
“Corporate earnings are far better than anybody could have imagined,” said George Mairs, president of money manager Mairs & Power Inc. in St. Paul. “I would be disappointed if the S&P 500 does not rise at least 10 percent for the year.”
Bob Dickey, managing director of technical analysis at RBC Dain Rauscher in Minneapolis, said the market, following a now-familiar trading pattern, was moving in fits and starts, “but the bottom line is we’re still in a trading range we’ve been in for four months and could be in for another four months.”
He added that it was almost as if “the doldrums of summer have set in early.”
