NEW YORK – Stocks ended a wild roller coaster ride on a negative note Friday, weighed down by dismal forecasts from high-tech and other bellwether companies and the added pressure of "triple witching" -- the simultaneous expiration of stock-index futures, stock-index options and stock options.
Indexes plunged in early trading before clawing their way back into positive territory by midday, only to drop again for good.
The blue-chip Dow Jones industrial average ended down 66.49 at 10,623.64, after dropping 123 points earlier. The technology-heavy Nasdaq Composite Index slipped 15.65 to 2,028.42, recovering somewhat after breaking below the psychologically key 2,000 level for the first time in two months.
The broader Standard & Poor's 500 Index lost 5.51 to close at 1,214.36, after losing more than 15 points earlier.
The Nasdaq fell 8.4 percent for the week, its biggest weekly decline this year. The Dow was off 3.2 percent and the S&P down 4 percent from last Friday's close.
The latest spate of profit warnings came from tech heavyweights like telecom equipment maker Nortel Networks Corp., and JDS Uniphase Corp., the fiber-optics parts supplier, as well as defensive names like restaurant chain McDonald's Corp.
``We expect the warnings to continue because our economists believe the economy will continue to deteriorate for the rest of the year,'' said Tucker Anthony market analyst Harry Laubscher.
But some investors snatched up what they saw as cheap stocks after the recent market decline, he said. The profit warnings, coupled with weak economic data, helped lift the market off its lows as hopes mounted that the Fed will slash rates by 50 basis points at its next policy-setting meeting on June 26-27.
Nortel dropped $1.14 to $9.46. The company announced new job cuts and predicted a big second-quarter loss as customers cut back significantly on purchases of telecom equipment.
JDS sank $1.86 to $11.95 after warning of an unexpected loss on weak revenues in the telecom spending slump.
The companies' gloomy news cast a pall over telecom gear and networking stocks.
``The telecoms and the opticals, the super hot stocks of yesterday are now exactly the opposite of what they were, a disaster,'' said Scott Bleier, chief investment strategist at Prime Charter Ltd. ``The stock market took these companies to so many billions of dollars in market value that it would take a miracle to justify their valuations.''
Software giant Microsoft Corp., rocked by rumors that it could issue a profit warning, dropped $1.40 to $67.50, weighing on the Dow and the Nasdaq. A spokesman said the company does not comment on rumors or speculation.
McDonald's, the world's largest restaurant company, fell $1.44 to $28.52. The fast-food giant and Dow component, hurt by a strong U.S. dollar and concerns over mad cow disease in Europe, forecast earnings below Wall Street expectations.
Also weighing on the Dow, consumer products company Procter & Gamble Co. dropped $1.81 to $63.05 after saying earnings in the current quarter and next fiscal year will be in line with current estimates, but growth will still be below long-term goals as its baby-care, feminine-care and western European businesses lag.
Big movers included AremisSoft Corp., up about 7 percent, or 87 cents to $13.52. The company, which makes software for the health-care and construction industries, raised its stock buyback plan to up to 4 million common shares from about 1 million.
Weak economic data early in the day spurred hopes the Fed would come to the rescue with a deep rate cut.
The Fed said U.S. factories, mines and utilities operated in May at their slowest pace in more than 17 years, reflecting the weakness in the factory sector. U.S. industrial capacity in use fell to 77.4 percent, the lowest since August 1983, when it was at 77.0 percent, the Fed said.
``At this point we think there are several 25 basis point cuts left, at least two,'' Bleier said. ``After that the Fed's work will serve to stabilize our economy, and that's what has to happen first and foremost before people can expect the economy to grow again.''
The market on Friday was also somewhat unsettled by a rise in consumer inflation, the latest proof that the economy is quite weak. Consumer inflation rose by a seasonally adjusted 0.4 percent in May, reflecting a big jump in gasoline and electricity costs, according to the Labor Department. The latest reading, up from a 0.3 percent increase in April, matched analysts' expectations.
Reports confirming the economy's weakness - from high unemployment to high costs for companies to produce good to inventory levels that are still quite high - contributed to Thursday's big selloff.
Declining issues outnumbered advancers 8 to 7 Friday on the New York Stock Exchange where volume was 1.57 billion shares, ahead of 1.22 billion on Thursday.
The Russell 2000 index, which gauges the performance of smaller companies stocks, slipped 0.25 to 495.13.
Overseas markets were lower Friday. Japan's Nikkei stock average ended the day down 0.4 percent. In Europe, Germany's DAX index fell 1.7 percent, Britain's FT-SE 100 slipped 0.5 percent, and France's CAC-40 lost 1.0 percent.
--Reuters and the Associated Press contributed to this report.