Major U.S. stock indexes closed lower on Friday ahead of the Labor Day holiday weekend as blue chips proved unable to sustain an intraday rally and technology shares dropped on a downbeat report from industry bellwether Sun Microsystems.
The blue-chip Dow Jones industrial average ended with a loss of 7.49 points, or 0.09 percent, at 8,663.50, according to the latest available data. The Dow had gained more than 1 percent during the session, bolstered by industrials such as 3M Company , up 30 cents at $124.95.
The broad Standard & Poor's 500 index sagged 1.73 points, or 0.19 percent, to 916.07, while the Nasdaq Composite fell 20.86 points, or 1.56 percent, to 1,314.91 to finish near its low of the day.
For the week, the Dow fell 2.4 percent and the S&P 500 fell 2.6 percent, both after five straight weeks of gains. The Nasdaq fell 4.8 percent. For August, the Dow fell 0.8 percent, the S&P 500 rose 0.5 percent, and the Nasdaq fell 1 percent.
The broad market wrapped up the week on a sour note, snapping a five-week winning streak in a soggy, pre-holiday week full of gloomy forecasts from corporate America and downbeat comments from Wall Street analysts.
"There's a growing sense that technology is going to take even longer to turn on the earnings front, so investors are shipping money out of that group," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Banking.
The market, particularly blue chips, got an early boost from data showing expansion in manufacturing and stabilization of consumer sentiment. These reports eased worries that the economy's rebound from recession has stalled and could stunt corporate profits.
Investors were quick to cash out after the market's strong run in recent weeks, bracing for the possibility of more bad news on the earnings front after having their hopes for improvement in corporate profits dashed repeatedly.
Volumes on the last trading day of the month were among the thinnest of the year ahead of the long Labor Day weekend, with many investors already on vacation and others heading out early. Wall Street is shut on Monday for the holiday.
"You could probably find more people that are typically at their desks in the Hamptons right now than you could in New York," said Mark Donahoe, managing director of institutional sales trading at U.S. Bancorp Piper Jaffray, referring to posh summer beach haven.
Sun (SUNW) was down 14 cents at $3.69 and was the most actively traded issue on Nasdaq. Sun Microsystems' chief financial officer lowered the computer maker's revenue outlook for the September quarter and said corporate spending on technology may be weakening.
Other computer-related tech shares felt a pinch from the Sun news. Web gear maker Cisco Systems (CSCO) was down 38 cents at $13.82 and top chip maker Intel Corp. (INTC) off 47 cents at $16.67. Among software companies, Microsoft Corp. (MSFT) was off $1.50 at $49.08 and Oracle Corp. (ORCL) lost 37 cents at $9.59.
"Tech's just not in good shape right now," Donohoe said. "You still have somewhat of a slowdown."
Another warning came from BellSouth Corp. (BLS), the No. 3 U.S local telephone company, which said 2002 earnings will fall below expectations due to a restructuring and weak sales in its wireless business as well as the turbulent economy.
Shares of BellSouth lost 93 cents, or 4 percent, to $23.32. SBC Communications Inc. (SBC), BellSouth's partner in the wireless joint venture Cingular Wireless, saw its stock drop $1.06, or 4 percent, to $24.74.
BellSouth's warning comes only five weeks after the company last revised its outlook on July 22, "highlighting the speed at which business conditions have apparently deteriorated," Merrill Lynch analyst Adam Quinton said.
Semiconductor equipment stocks were buffeted by a slew of downgrades by Merrill Lynch, which cut its midterm ratings on chip gear makers KLA-Tencor Corp. (KLAC) and Applied Materials Inc. (AMAT), citing Sun's dim forecast. It also cut its rating on Novellus Systems Inc. (NVLS).
Reactions were mixed in the recently pummeled sector. KLA-Tencor slipped 75 cents to $32.87, Applied Materials fell 8 cents to $13.36 and Novellus rose 17 cents to $24.46.
The S&P is still up about 15 percent since it slammed down to a 5-year low on July 23. Investors have put aside some of their jitters about corporate corruption and taken comfort in the Federal Reserve's decision earlier this month to leave the door open to further interest rate cuts.
Stocks have stalled somewhat, however, as uninspiring forecasts from companies including Intel and Nortel Networks and lingering doubts about the strength of the economic rebound nags investors.
Manufacturing in the Midwest expanded for the seventh straight month in August, stepping up its pace from the prior month, according to one report. Another report showed consumer sentiment dipped in August but stabilized as the stock market rebounded for most of the month, even as Americans fret about the economy's future path.
After the open, the University of Michigan's final August consumer sentiment index fell slightly to 87.6, down from 88.1 in July and a mid-month reading of 87.9, market sources said Friday. That was below expectations for a rise to 88.3.
On a more upbeat note, the National Association of Purchasing Management-Chicago index rose to 54.9 in August from 51.5 in July. It was the seventh consecutive reading above 50, which points to an expanding regional manufacturing economy. A reading below 50 signals contraction.
In the news, Major League Baseball players reached a new labor agreement with team owners in 11th-hour talks, averting a strike just ahead of the deadline, said Donald Fehr, chief of the players' union.
Shares of Rawlings Sporting Goods Co. (RAWL), whose gloves, bats and balls are used by many players, rose 32 cents, or 6 percent to $5.37 on the Nasdaq.
Genelabs Technologies Inc. (GNLB) rose $1.43, or 103 percent, to $2.82. The drug developer said it received conditional U.S. regulatory approval for a new drug to treat the degenerative disorder lupus, but would need to conduct an additional clinical trial to gain clearance.
UAL Corp. (UAL) fell 18 cents, or 6 percent, to $2.87. UAL's United Airlines said it will seek $1.5 billion in annual cost reductions from its labor unions as part of a plan to cut yearly costs by $2.5 billion and avoid a bankruptcy filing.
The Russell 2000 index, the barometer of smaller company stocks, fell 3.44, or 0.9 percent, to 390.96.
Overseas, Japan's Nikkei stock average finished Friday essentially unchanged, off 0.01 percent. In Europe, France's CAC-40 rose 1 percent, Britain's FTSE 100 gained 0.4 percent, and Germany's DAX index advanced 1.4 percent.
Reuters and the Associated Press contributed to this report.