NEW YORK – The tech-heavy Nasdaq index notched its biggest weekly decline in 2 1/2 years, pulling the rest of Wall Street lower Friday, as fears of higher interest rates again prompted investors to overlook strong earnings — this time from ChevronTexaco (CVX) and Procter & Gamble (PG).
The Dow Jones industrial average (search) fell 46.70 points, or 0.45 percent, to 10,225.57. The Standard & Poor's 500 Index (search) gave up 6.66 points, or 0.60 percent, to 1,107.23. The Nasdaq Composite Index (search) fell 38.63 points, or 1.97 percent, to 1,920.15.
For the week, the Dow lost 2.4 percent and the S&P slipped 2.9 percent. Blue chip stocks have escaped some selling because they are seen as relatively stalwart compared to the growth issues in the Nasdaq.
Oil stocks helped limit the markets' declines after ChevronTexaco reported strong results. The Standard & Poor's Integrated Oil & Gas index was among the day's better performing sectors, rising 0.3 percent.
But Cisco Systems (CSCO) dragged down the Nasdaq, which fell for the fifth straight day and notched its biggest weekly drop since April 2002.
Fears that the Fed will soon raise interest rates to curb inflation have weighed on Wall Street. Investors are uncertain when the central bank will begin raising interest rates amid improving economic indicators and signs of budding inflation.
"There's a strong sensitivity now to interest rate increases, and high-priced stocks such as tech stocks are generally more sensitive to that," said Ed Peters, chief investment officer at PanAgora Asset Management in Boston.
The Fed is scheduled to meet on Tuesday to decide on interest-rate policy. Though investors expect it will leave its benchmark fed funds rate unchanged at 1 percent, analysts believe the Fed will lay the groundwork in its policy statement for a rate hike that many expect will come in August.
"There's fear that when the Fed comes out with a statement next week, it's going to be a bit more hawkish than before, or at least less neutral, so people are turning to stocks that are less rate-sensitive," Peters said.
Selling in tech stocks started early in the day and intensified as the session wore on. Bob Dickey, managing director of technical analysis at RBC Dain Rauscher in Minneapolis, said the market, following a now familiar trading pattern, was moving in fits and starts, "but the bottom line is we're still in a trading range we've been in for four months and could be in for another four months."
He added that it was almost as if "the doldrums of summer have set in early."
The Commerce Department reported that consumers boosted their spending by 0.4 percent last month. That followed a 0.4 percent increase in February, according to revised figures. The figures are closely watched because consumer spending accounts for roughly two-thirds of all economic activity in the United States.
The market has been dropping on upbeat economic reports for several weeks. On Thursday, it fell after the government reported that the economy as measured by the gross domestic product grew at a 4.2 percent annual rate in the first quarter, a slight improvement from a year earlier.
Cisco Systems, the world's largest maker of equipment that directs Internet traffic, topped the Nasdaq's most actively traded list. Its shares fell after smaller rival Foundry Networks Inc. gave a disappointing financial forecast.
Shares of Cisco ended down 4.6 percent, or $1, to $20.91. Foundry tumbled $2.85, or 20.1 percent, to $11.30.
ChevronTexaco shares jumped after it posted a 33 percent rise in quarterly profit, driven by strong gasoline and energy prices. Shares of ChevronTexaco, the No. 2 U.S. oil company, rose $1.20, or 1.3 percent, to $91.55.
But Procter & Gamble Co. shares fell, even after reporting its quarterly profit jumped 20 percent. P&G shares fell 22 cents, or 0.2 percent, to $105.75, giving up earlier gains.
Health insurer Cigna Corp. (CI) fell after it posted a drop in first-quarter net profit but raised its full-year outlook. Shares were trading down 57 cents at $64.25.
Gateway Inc. (GTW) shares fell after its earnings, excluding items, of a loss of $75 million or 22 cents was wider than analysts expected. Its shares were down 21 cents at $5.10.
Trading was heavy, with 1.6 billion shares changing hands on the New York Stock Exchange, above the 1.4 billion daily average for last year. About 2.17 billion shares were traded on the Nasdaq, above last year's 1.8 billion daily average.
The Russell 2000 index of smaller companies was down 7.45, or 1.3 percent, at 559.80.
Overseas, Japan's Nikkei stock average fell 2 percent. Britain's FTSE 100 finished down 0.7 percent, Germany's DAX index slipped 0.6 percent and France's CAC-40 lost 0.4 percent.
Reuters and the Associated Press contributed to this report.