NEW YORK – Blue chips fell Friday as investors sold off stocks following a steep gain in the previous session, and technology stocks barely managed to stay afloat with help from strong Microsoft results.
The Dow Jones industrial average (search) fell 54.89 points, or 0.52 percent, to 10,568.29. The Standard & Poor's 500 Index (search) eased 2.39 points, or 0.21 percent, to 1,141.55. The Nasdaq Composite Index (search) rose 4.85 points, or 0.23 percent, to 2,123.86.
Friday marked the first down week in more than a month for the Dow and Nasdaq. For the week, the Dow slipped 0.30 percent, breaking eight straight weeks of gains. The Nasdaq fell 0.78 percent, breaking a six-week long winning streak. But the broader S&P rose 0.15 percent, its ninth straight up week.
"People are primarily taking profits today," said Cary Nordan, vice president and equity analyst at BB&T Asset Management in Raleigh, North Carolina.
"Overall, the tone has been positive, but investors are looking ahead to the next six to 12 months and concerned there's going to be a deceleration in earnings growth relative to last year."
Strong results from Microsoft Corp. (MSFT) gave the market a boost early in the session, but shares drifted lower throughout the day. After so many weeks of gains, there was growing concern about valuations, and investors seemed intent on locking in profits. Most analysts remain upbeat about the market over the long term, however.
"In weeks like this you have to take a holistic view of the market, and not get too shook up about one stock being down a couple percent on what should be perceived as a good earnings announcement," said John C. Forelli, portfolio manager for Independence Investment LLC in Boston.
Wall Street is about halfway through a highly anticipated earnings season, and more than 100 companies in the S&P are expected to report results next week.
Overall, profits are expected to be 20 percent higher than last year, but many of these gains may already be reflected in stock prices, analysts say. Despite that, the news has been generally good, said Susan L. Malley, chief investment officer for Malley Associates Capital Management.
"There are places in the market where things are overvalued but there are still places where they're not, and we're still finding things to buy," Malley said. "I'm not concerned about this modest pullback. ... If we didn't get a little bit of a rest like this, I'd be more concerned."
Malley said her firm has favored basic materials, which stands to benefit with rising demand from China, as well as energy and industrials, two sectors that typically do well when the economy is accelerating.
"We still think tech will do well, though," she added. "We still have a chunk in tech and a chunk in finance."
Tech bellwether Microsoft Corp. (MSFT) closed up 47 cents at $28.48 after several brokerage firms issued positive comments about its quarterly results, released late Thursday. The software titan's earnings beat expectations as stronger demand for personal computers helped boost sales, and the company raised its forecast for the year.
AT&T Corp. (T) closed down 70 cents at $19.70 after Lehman Brothers cut its rating. The telephone service provider beat analysts' forecasts in earnings released Thursday, but its revenues were down amid long distance price wars, competition from cell phones and weak business demand.
Eastman Kodak Co. (EK) lost $1.07 to $29.88 after gaining 13 percent Thursday on high hopes for its restructuring plan. Kodak, which beat expectations for the quarter, is shifting its focus from traditional film to the digital photography market, and plans to cut up to 15,000 jobs this year.
Shares of Regions Financial Corp. (RF) and Union Planters Corp. (UPC) rose sharply after the banks announced plans to merge. Regions closed up $2.00 at $39.75, while Union Planters gained $1.31 to $32.67.
McKesson Corp. (MCK) closed down $2.18 at $29.30 after reporting earnings that missed analysts' estimates. The health care supply management company said drug price changes hurt profits in its pharmacy outsourcing business.
Volume was heavy, with roughly 1.54 billion shares changing hands on the New York Stock Exchange, and about 2.24 billion shares traded on the Nasdaq. Advancers narrowly outpaced decliners by a ratio of about 17 to 16 on the NYSE, and by roughly 9 to 7 on the Nasdaq.
The Russell 2000 index (search), which tracks smaller company stocks, closed up 4.41, or 0.8 percent, at 596.14.
Overseas, Japan's Nikkei stock average finished 0.6 percent higher Friday. France's CAC-40 closed down 0.1 percent, Britain's FTSE 100 finished down 0.4 percent and Germany's DAX index gained 0.3 percent.
Reuters and the Associated Press contributed to this report.