NEW YORK – Stocks tumbled Friday as investors focused on fears about the struggling economy and shelved optimism that growth will soon resume.
The Dow Jones industrial average closed down 117.05 points, or 1.05 percent, to 11,005.37. The technology-heavy Nasdaq composite index fell 30.99 points, or 1.36 percent, to close at 2,251.03. The broad Standard & Poor's 500 index declined 15.28 points, or 1.18 percent, to 1,277.89.
Stock prices fell on the latest indication of a slumping economy as the Commerce Department reported Friday that output for the first three months of this year was weaker than previously estimated.
The gross domestic product — the country's total output of goods and services — grew at an annual rate of just 1.3 percent in the first quarter, less than the 2 percent rate that the government estimated last month, which raised analysts' and investors' hopes for a rebound.
Analysts also said investors were wary Friday of making big moves in the market ahead of the three-day Memorial Day weekend, evident in lighter trading volume than other days this week when the action was more moderate.
But Friday's selling was also expected given that the market has been rallying hard since April, based largely on investors' resurgent hopes that lower interest rates will spur the economy and earnings forward again.
With Friday's 117-point decline, the Dow has still gained 17 percent from its recent March low of 9,389.48. Meanwhile, the Nasdaq has jumped nearly 24 percent from its March low of 1,820.57.
"You get a couple of reminders that the economy is still sloppy, and it doesn't surprise us to see some profit-taking," said John Forelli, senior vice president of Independence Investment Associates Inc., which oversees $20 billion. "But what you really have to be buying stocks on today is not on your expected second-quarter economic statistics, it's your expected fourth-quarter economic statistics.''
Investors' recent hopes, however, were diminished somewhat Friday by a speech given Thursday night by Federal Reserve Chairman Alan Greenspan, who told the Economic Club of New York that the worst of the slowdown that has gripped the nation since the second half of 2000 may not be over.
Investors could take some encouragement from Greenspan, who reiterated Thursday that the Fed is willing to keep reducing interest rates until the economy starts churning again. So far this year the central bank has made five reductions totaling 2.5 percentage points.
Another brighter spot came via the University of Michigan's May report on its consumer-sentiment index, which was reported Friday to have risen to 92 from 88.4 registered for April, though slightly lower than the 92.6 from the preliminary number recorded in mid-May.
Still, Wall Street focused on the negative economic news Friday, and the uptick consumer sentiment failed to pull up retailing stocks. Wal-Mart traded down $1.69 to closed at $51.20, and Home Depot fell $1.17 to $52.28.
Among tech shares, Cisco Systems fell 86 cents to $22.05, and Compaq Computer declined 60 cents at $16.95.
Vitesse Semiconductor stumbled $1.48 to $30.29, still weak after a report issued earlier this week said that the makers of semiconductor equipment in April suffered a 41 percent drop in customer orders from March.
On a brighter note, TiVo Inc. jumped $2.71 to $11.21 on Nasdaq after it said late on Thursday that despite a wider quarterly net loss, revenues jumped sharply, driven by the addition of some 35,000 new subscribers to its service which can pause, record and play back live television.
As for blue chips, McDonald's slipped 25 cents at $30.51, and Procter & Gamble fell 75 cents to $63.50.
Ford Motor fell 91 cents to $24.74 after announcing on Monday that it will replace 13 million Firestone Wilderness AT tires on its vehicles.
Dupont slipped 15 cents to $45.62. The chemical products maker said on Wednesday that business conditions are so difficult that it cannot forecast profits for the remainder of the year.
Lucent Technologies, the most active stock on the New York Stock Exchange, fell 13 cents to $9.40 amid talk that a takeover by French rival Alcatel was imminent. Some analysts say the deal, valued at about $33 billion, offers few synergies and could spark cultural clashes. Alcatel's U.S.-listed shares fell $1.35 to $28.11.
Declining issues narrowly outnumbered advancers 8 to 7 on the New York Stock Exchange, where volume was 661.11 million shares, down from 858.20 million at the same point Thursday.
The Russell 2000 index, the barometer of smaller companies stocks, ended Friday down 1.78 at 508.62.
Overseas markets were also lower Friday. Japan's Nikkei stock average finished the day down 0.9 percent. In Europe, Germany's DAX index fell 0.9 percent, Britain's FT-SE 100 slipped 0.4 percent, and France's CAC-40 lost 1.3 percent.
— The Associated Press and Reuters contributed to this report.