NEW YORK – Stocks fell Friday as disappointing financial news from chipmaker Micron Technology Inc. (MU), athletic shoes maker NIKE Inc. (NKE) and fast-food chain McDonald's (MCD) outweighed optimism about an improving economy.
The Dow Jones industrial average slipped 52.17 points, or 0.50 percent, to 10,427.67. The broader Standard & Poor's 500 Index lost 4.89 points, or 0.42 percent, at 1,148.70. The technology-laced Nasdaq Composite Index edged down 17.44 points, or 0.93 percent, to 1,851.39 after rallying briefly earlier.
For the Dow, it was the first losing week after five straight winners. The S&P 500 fell after three weeks of rising.
"The market behavior outlines both the opportunity and the trouble," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "The opportunity is the economic growth story is intact...The problem is it is having trouble finding those new (leadership) sectors because it suffers from those concerns: (earnings) visibility and valuations."
Negative comments from Wall Street house Salomon Smith Barney on oil services and drilling companies and broadcasters helped dent sentiment, as did some gloomy news from the beleaguered telecommunications sector when Moody's Investors Service cut its ratings for Lucent Technologies Inc..
Investors were also spooked this week by what they see as prospects for higher interest rates later this year after the U.S. Federal Reserve said Tuesday the U.S. economy was growing.
"It's a quiet market with low volume, but it seems people are a little hesitant with the potential for rate hikes coming," said Ahmed Okumus, manager of the $550 million Okumus Opportunity Fund in New York. Higher rates would put a cap on growth and may curb corporate profits.
For the week, the S&P 500 is down 1.5 percent, the Dow average down 1.7 percent, and the Nasdaq is off 0.9 percent.
Resistance -- the point where sellers are likely to emerge -- is at 10,550 for the Dow, 1,895 for the Nasdaq and 1,162 for the S&P, according to research firm Schaeffersresearch.com.
Support -- where buyers are expected to swoop in -- is at 10,425 for the Dow, 1,825 for the Nasdaq and 1,140 for the S&P. The levels are key elements of technical analysis, which studies prices, volume and charts.
Moody's cut Lucent (LU)'s rating two notches, saying it will suffer a longer and deeper downturn in demand for its telecom products than expected. Lucent, the second most active stock on the Big Board, fell 19 cents to $4.59, or 3.97 percent.
Weighing on the Dow, aerospace giant Boeing Co. (BA), lost $1.28 at $46.39 after reports the Navy and Marine Corps plan to slash by 30 percent purchases of the Joint Strike Fighter, or F-35, made by Lockheed Martin Corp. and Boeing's F-18E/F fighters. Lockheed was off $1.40 at $56.25.
Widely held McDonald's Corp. , a Dow stock, fell $1.05, or 3.66 percent, to $27.65. The company said its yearly earnings would likely miss Wall Street's consensus forecasts as weak economies worldwide hurt sales.
NIKE, the world's largest athletic shoe and clothing maker, tumbled $3.70 or 5.85 percent, to $59.50, after some analysts said they were disappointed its worldwide futures orders, a measure of future demand, increased only 6 percent. Some had expected the growth figure to be around 8 percent.
On a bright note, Palm Inc. (PALM) rose 69 cents, or 21.8 percent, at $3.86 on the Nasdaq. The No. 1 handheld-computer maker reported a quarterly net profit as strong demand for new products helped revenues beat analysts' expectations.
Travelers Property Casualty Corp. (TAPA) jumped $1.06 to $19.56 in its first day of trading as a public company. The Citigroup unit raised $3.88 billion Thursday in the biggest U.S. insurance IPO ever. It was the most-active stock on the NYSE, with about 75 million shares changing hands.
In the tech sector, Micron Technology Inc. fell 61 cents at $33.90 after the computer-memory chipmaker reported a loss as it saw sales decline from a year earlier. Solectron Corp. lost 25 cents at $8 after the contract electronics manufacturer posted a net loss and said it expects continued weak sales in the current quarter.
Orthopedic device maker Biomet Inc. (BMET) tumbled $3.93 to $27.53 after reporting profits that missed Wall Street estimates.
Oil services companies' shares sold off after Salomon Smith Barney cut ratings on 14 firms, including Baker Hughes Inc. (BHI) and Schlumberger Ltd. (SLB), saying sharper-than-expected declines in the Western Hemisphere rig count are likely to push results below forecasts.
Baker Hughes lost $2.55 to $36.75 and Schlumberger shed $2.90 to $57.15.
Salomon also cut its ratings on broadcasting companies following a recent run-up in these stocks. They included Clear Channel Communications Inc. (CCU), down 65 cents to $52.50.
Providing a bright spot, home builders' shares rallied, such as KB Home up $2.76 at $43.26, or 6.8 percent.
Declining issues outnumbered advancers nearly 3 to 2 on the New York Stock Exchange. Consolidated trading volume was light at 1.54 billion shares, below Thursday's 1.62 billion.
The Russell 2000 index, which measures the performance of smaller company stocks, fell 3.05, or 0.6 percent, to 502.39. But the Russell stood apart from the rest of the market by posting a weekly advance of 0.7 percent.
Overseas, Tokyo stocks bucked a higher trend in Asian shares, falling as major banks extended recent losses after a newspaper report that Prime Minister Junichiro Koizumi was not planning extra steps to combat deflation for now.
The comment in the Nihon Keizai Shimbun rekindled fears that the government may become idle after the recent strong rise in Tokyo shares and slacken its drive to kick-start the economy.
The benchmark Nikkei average fell 181.70 points or 1.58 percent to 11,345.08, bringing its two-session fall to 3.8 percent. The market was closed on Thursday for a national holiday. The broader, capital-weighted TOPIX index ended down 21.22 points or 1.93 percent at 1,076.63.
European equities were higher, boosted by chipmakers on earnings optimism, and retailers after Spain's Inditex and Sweden's Hennes & Mauritz posted solid results.
In Europe, Germany's DAX index gained 0.3 percent, France's CAC-40 advanced 0.5 percent, and Britain's FT-SE 100 declined 0.1 percent.
Reuters and the Associated Press contributed to this report.