Retail and technology stocks gained Friday on news of busy shoppers last month and Adobe Systems Inc.'s positive outlook, but the Dow was knocked for a loss by Honeywell International Inc., which cut its profit forecast.
The blue-chip Dow Jones industrial average lost 66.72 points, or 0.80 percent, to 8,312.69, according to the latest available data, weighed by Honeywell, GE and United Technologies. The broad Standard & Poor's 500 was up 2.90 points, or 0.33 percent, at 889.81. The tech-packed Nasdaq Composite Index gained 11.72 points, or 0.92 percent, to 1,291.40.
For the week, the Dow fell about 1.4 percent, the Nasdaq was down 0.3 percent and the S&P was off 0.5 percent.
"The outlook continues to deteriorate, we have a war on the horizon and individual companies are not saying they see demand picking up any time soon," said William Strazzullo, market analyst at State Street Global Markets.
Upbeat data showing tame inflation and strong retail sales, as Americans flocked to car showrooms, gave a mild boost to the broad market. The Street also got a dose of downbeat numbers as soft consumer sentiment data raised fears about the sustainability of spending by Americans.
The warning out of Honeywell (HON) sent shares of the blue chip spiraling down nearly 17 percent. It weighed on peers United Technologies Corp. (UTX) and General Electric Co. (GE) But tech investors found reason to buy the battered sector.
"The news on Nasdaq is a little bit more concrete, given that Adobe had decent news and the stocks responded well," said Brian Pears, head of equity trading at Victory Capital Management. "It's one thing to be worried about Iraq, or terrorism. It's a totally different thing when one of the leaders of a niche market says things are getting better."
Honeywell (HON) sank $4.78 to $23.56 and ranked as the biggest percentage loser on the Dow. The company cut earnings estimates for the third quarter and full year, explaining that the broad economic recovery was not materializing, especially in the aviation industry.
"The Honeywell warning has an impact," said Philip Dow, director of equity strategy at RBC Dain Rauscher. "It's a continuation of this very, very slow recovery."
Iraq rejected U.S. demands to let weapons inspectors into the Arab oil-exporting country, a day after President Bush told the U.N. General Assembly that unspecified action against Iraq would be inevitable unless the United Nations forced Baghdad to eliminate weapons of mass destruction.
The prospect of war as the economy struggles to grow has kept steady pressure on the market.
"Any foreseeable trend in the market will be dictated by money that will be put to work," said Weston Boone of Legg Mason Wood Walker. "The dominant themes are a market trading down on low volume and people have not come back from the summer vacations with any motivation. A lot of it was waiting to see the passing of the 9/11 anniversary."
Just two days after the anniversary of the Sept. 11 hijacker attacks, the threat of more attacks in the United States added to tensions over a possible war with Iraq. Police in Florida detained three men and detonated a backpack found in their car after a woman in a Georgia restaurant overheard three men discussing details of what was considered a possible terrorist threat.
Retailers drew some fuel from the upbeat sales numbers. Wal-Mart Stores (WMT) added $1.28 to $54.40, and Home Depot Inc. (HD) added 97 cents at $33.45, both supporting the Dow and helping push the S&P retail index up 2.12 percent.
Adobe (ADBE) rallied $2.32, or 12.5 percent, to $20.77 and ranked among the largest percentage gainers on Nasdaq. It said net earnings rose from a year earlier as investment losses narrowed, and forecast growth in the current quarter.
Lucent Technologies Inc. (LU) lost 38 cents, or 23 percent, to $1.26. The telecom gear giant said its business was much worse than analysts had feared and more job cuts were likely as spending by telephone companies continues to deteriorate. Among other issues in the sector, Nortel Networks fell 11 cents, or 10.3 percent, to 95 cents.
Advanced Micro Devices Inc. (AMD) fell 43 cents to $7.21. The chip maker said it is delaying the launch of its new microprocessor by several months, prompting some analysts to widen their estimates for the company's 2003 losses.
UBS Warburg said AMD's launch delay could mean it will lose market share as customers rethink their products and move to Intel Corp. (INTC), its larger competitor. Intel shares edged up 33 cents to $16.03.
ESS Technology Inc.(ESST), which makes chips for the DVD market, tumbled $3.55, or 31.6 percent, to $7.68. The company said earnings and revenue for the rest of the year would be lower than previously expected because slower demand and increased competition have forced it to cut prices.
Video game publisher Acclaim Entertainment Inc. (AKLM) rose after portfolio manager Eric Green of Penn Capital Management, who owns the stock, said it was cheap and worth buying. Acclaim rose 30 cents, or 15 percent, to $2.29.
Winners beat losers by a ratio of about 9 to 7 on the New York Stock Exchange and on Nasdaq. More than 1.2 billion shares traded hands on the Big Board and Nasdaq in moderate trading.
The Russell 2000 index, the barometer of smaller company stocks, rose 3.72, or 1 percent, to 389.99.
Overseas, Japan's Nikkei stock average finished lower 1.8 percent. In Europe, France's CAC-40 fell 2.6 percent, Britain's FTSE 100 declined 1.9 percent, and Germany's DAX index was down 1.8 percent.
Reuters and the Associated Press contributed to this report.