NEW YORK – Stocks fell on Friday but managed a partial recovery from a brutal morning sell-off, the bargain-hunting bounce limiting the damage from Intel Corp.(INTC)'s surprisingly bleak revenue outlook.
The Dow Jones industrial average fell 34.97 points, or 0.36 percent, to 9,589.67, rising from an earlier drop of 152 points. The Nasdaq composite finished with a loss of 19.40 points, or 1.25 percent, at 1,535.48. Earlier, the tech-heavy market measure had dropped almost 60 points. The broader Standard & Poor's 500 Index fell 1.62 points, or 0.16 percent, to 1,027.53.
For the week, the three major indexes registered the biggest percentage declines since late April. The Dow fell 3.4 percent for the week, while the Nasdaq has lost 5 percent since last Friday's close and the S&P 500 finished the week down 3.7 percent. For the year, the Nasdaq is down 21.3 percent, the S&P 500 is off 10.50 percent and the Dow is down 4.3 percent.
Shares of Tyco International Ltd. (TYC) reeled more than 30 percent lower after a report revealed a widening criminal probe into whether executives used the conglomerate's cash to buy art and homes. That followed the charges laid against its former chief executive on tax evasion earlier this week and a possible delay of a crucial sale or stock offering of its CIT Group finance arm.
"The major issue is the breakdown of confidence in Corporate America. People don't know what they're buying or if the earnings are real," said Jon Burnham, who helps oversee $800 million for Burnham Asset Management.
After forging a new deep trough in the broad market not seen since the weeks after Sept. 11, traders pushed up stocks from their lows late in the session, forcing market participants, who had made bets the market would fall, to temporarily buy back securities they sold short.
"It's a bit of a short squeeze," said Bruce Turner, head of U.S. stock trading at CIBC World Markets. "You can't get wildly optimistic about a long-term rally."
Shares of Intel plunged $5, or more than 18 percent, to $22 after the world's largest semiconductor maker cut its revenue forecast, citing lower-than-expected demand in Europe.
Analysts and investors had prepared themselves for a narrowing of the revenue range toward the lower end of the company's previous forecast. But they were surprised that Intel took the bottom out of its earlier range, which indicated to them demand is even weaker than previously thought.
Shares of rival Advanced Micro Devices Inc. (AMD) fell 80 cents, or 7.5 percent, to $9.81 on the New York Stock Exchange.
Tyco International's problems worsened with a Wall Street Journal report of a probe into possible misuse of the conglomerate's funds by company executives.
That followed the charges laid against its former chief executive on tax evasion earlier this week and a possible delay of a crucial sale or stock offering of its finance arm, the CIT Group. But late in the session, Tyco said in a conference call with investors that it expected to work out its CIT issues with the Securities and Exchange Committee shortly and complete the offering by as soon as month's end.
Tyco shares sank 31 percent, or $4.50, to $10.10.
The drop accelerated a precipitous decline that has erased nearly $100 billion in shareholders' money since the beginning of the year -- more than was lost in the collapse of energy giant Enron Corp.
"I think that people need a little more confidence in senior leadership of a lot of these different corporations," said Jack Schwetje, senior trader at Deutsche Bank Securities. "Hopefully, whatever's out there that's been bad is being shaken out of the market right now."
Shares of Biogen Inc. (BGEN) tumbled after the firm warned that earnings for the second quarter and full year will be lower than expected amid slower sales of its drug for multiple sclerosis. Shares lost $5.54, or 11.6 percent, to $42.16.
The market found little encouragement from a government report that showed the U.S. labor market was recovering slowly from last year's recession. The number of workers on U.S. payrolls grew by 41,000 in May -- below the gain of 58,000 jobs forecast by economists. The unemployment rate dropped unexpectedly in May to 5.8 percent from 6.0 percent, the Labor Department said. Economists had forecast the unemployment rate would rise to 6.1 percent.
Support -- where buyers are expected to swoop in -- is at 1,480 for the Nasdaq and 1,000 for the S&P. Resistance -- the point where sellers are likely to emerge -- is at 1,600 for the Nasdaq, 9,800 for the Dow and 1,050 for the S&P, according to Schaeffer's Investment Research. The levels are key elements of technical analysis, which studies prices, volume and charts.
"We got close to some major support in the S&P 500, which was about 1,000 and I really think it is a bounce," said Bill Strazzullo, market strategist with State Street Global Markets. "The bigger picture is still down."
Beating the downward trend, battered and cash-strapped telecommunications company Nortel Networks (NT) rose 23 cents, or 16.3 percent, to $1.64 even as it announced a new $1.3 billion stock sale that will add between 1.054 billion and 1.136 billion shares to an existing 3.2 billion outstanding.
Advancing issues led decliners 4 to 3 on the New York Stock Exchange in heavy trading. Volume came to 1.80 billion shares, compared with 1.59 billion shares Thursday.
The Russell 2000 index gained 5.22 to 470.51.
Overseas, Japan's Nikkei stock average fell nearly 1.2 percent. In Europe, Germany's DAX index slipped 1.0 percent, Britain's FTSE 100 lost 0.8 percent, and France's CAC-40 dropped 1.9 percent.
Reuters and the Associated Press contributed to this report.