NEW YORK – Stock losses accelerated in thin trading Wednesday after a bleak report on the economy further scared away investors who had already been hit with some dismal forecasts from technology bellwethers.
The Federal Reserve, in its anecdotal survey of national economic conditions, also known as the ``beige book,'' said the economy remained sluggish in June and July, and the manufacturing sector's woes had begun to bleed into other areas of the economy.
Meanwhile, Internet equipment giant Cisco posted a 99 percent drop in profits and warned first-quarter sales may fall. Data storage equipment maker Emulex Corp. added to fears after saying profits declined and it does not know when the slowdown in technology spending will end.
The Dow Jones industrial average fell 165.24 points, or 1.58 percent, to 10,293.50, while the technology-heavy Nasdaq Composite Index lost 61.43 points, or 3.03 percent, to 1,966.36, its lowest close since July 24. The broader Standard & Poor's 500 Index surrendered 20.87 points, or 1.73 percent, to 1,183.53.
Year to date, the Dow is down 4.6 percent, the Nasdaq is off 20.4 percent and the S&P 500 has fallen 10.4 percent.
A major culprit was Intel, which dragged down the Dow with a loss of $1.01 to $29.61.
Cisco, down $1.28 at $17.98, was the second-most active Nasdaq stock after the No. 1 maker of gear that directs Internet traffic posted a 99 percent drop in fiscal fourth-quarter profits amid an economic slowdown that slammed the high-tech sector. The company also said first-quarter sales could drop as much as 5 percent from the fourth quarter's $4.3 billion.
Cisco Chief Executive John Chambers said while the U.S. market is approaching a bottom, customers remain cautious. Business also is not looking any better in Europe or Asia, and could still get worse in Japan, he said.
The stock has lost half its value this year.
Emulex lost $2.33 to $23.36 after saying fiscal fourth-quarter profits fell 6 percent and that it does not know when the slowdown in technology spending will end.
Cisco rival and Internet router maker Juniper Networks slipped $2.43 to $23.47, while Avaya Inc. dropped 21 cents to $11.99.
``There hasn't been any guidance,'' said Robert Arancio, head of Nasdaq trading at Lehman Brothers. ``Everyone was already looking past the summer. But now people are saying there's really nothing out there'' indicating ``things are going to get better in the third and fourth quarter.''
Still, retail shares clambered higher as Wall Street bet the Federal Reserve's six interest-rate cuts so far this year will soon spur the lagging economy and profits for consumer companies.
``The market is starting to react less negatively to bad news than it was six months ago, because stock prices are lower and the market is beginning to anticipate the economy improving,'' said Donald Selkin, chief market strategist for brokerage Joseph Gunnar & Co. ``I mean, how much lower can Cisco go?''
Catalog and Internet clothing retailer Lands' End Inc. helped spur a rally in apparel stocks after reporting a profit that far exceeded Wall Street expectations, helped by higher sales in its core clothing business. Lands' End rose $3.48, or 9.9 percent, to $38.64. Youth-oriented clothiers Gap Inc. rose 79 cents to $27.93, and The Limited Inc. gained 75 cents to $17.49.
Software giant Microsoft Corp. said it asked the U.S. Supreme Court to review an appeals court ruling that the company abused its monopoly in personal computer operating systems. Its shares fell $1.49 to $64.86.
Merger news kept Wall Street on its toes. Cooper Industries Inc. jumped $6.24 to $60.23 after the maker of electrical products, tools and hardware said it is for sale, even as it rejected a second takeover offer by larger rival Danaher Corp., calling the offer inadequate. Danaher lost $1.09 to $57.46.
Cooper said it has received interest from several parties since Danaher revealed its offer for the company.
Job cuts stemming from the sluggish economy may have had a beneficial effect on one company. Advertising and marketing company TMP Worldwide Inc. said earnings rose 67 percent as people looking for jobs in the slowing U.S. economy turned to TMP's online job search site Monster.com.
Declining issues led advancers 3 to 2 on the New York Stock Exchange. Volume was 1.10 billion shares, compared with 977.04 million Tuesday.
The Russell 2000 slipped 7.71 to 472.62.
Overseas, Japan's Nikkei stock average fell 1.26 percent. In Europe, Germany's DAX index slipped 2.4 percent, Britain's FT-SE 100 lost 1.1 percent, and France's CAC-40 fell 1.3 percent.
-- Reuters and the Associated Press contributed to this report.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox