Tech Stocks Lower on Rate-Cut Worries

Technology stocks slid Monday in very light trading as investors worried that the Federal Reserve may not lower interest rates as much as previously expected, in light of recent numbers showing strength in the U.S. economy.

Traders and analysts had expected the central bank to slash interest rates by half a percentage point -- but reports on Friday showed strong consumer sentiment and an uptick in retail sales that prompted some to lower their projections.

Analysts said the market's tentativeness resulted from doubts about how big a rate cut the Fed will make - if it makes one at all - on Tuesday.

``It's really been a non-event day,'' said Stephen Carl, head of equity trading at The William Capital Group. ``Everybody's just on the sidelines waiting to see what the Fed does. The volume is so low that it's hard to tell what, if anything, else is going on.''

The blue-chip Dow Jones industrial average closed up 56.02 at 10,877.33, according to preliminary calculations, on gains that mostly came late in the session.. The broader Standard & Poor's 500 Index  rose 3.25 to 1,248.92.

The Nasdaq Composite Index shed 25.51 to 2,081.92, giving it a 116.85-point loss over the past four sessions.

On Friday, stocks slumped after the economic numbers cast doubt on the Fed's aggressive campaign of cutting rates to spark growth. The Fed has hacked 2 percentage points off the federal funds rate so far this year, and Wall Street is hoping for another half-percentage point of easing to prompt consumer spending and boost corporate profits.

``After strength in the economic numbers last week, I'm not sure 50 basis points is a foregone conclusion anymore,'' said Tom Schrader, head of listed trading at Legg Mason Wood Walker Inc. in Baltimore. ``Anything less is really going to throw the market for a loop.''

One dealer in a survey of 25 banks and investment firms that trade directly with the Fed taken by Reuters on Friday thought the central bank would reduce the rate by 25 basis points. While the remaining dealers forecast a 50 basis-point rate cut, portfolio managers fretted stocks would decline either way.

``Stocks in all likelihood are going to go down tomorrow because 50 basis points are already expected and 25 aren't enough,'' said Michael Ranis, who helps oversee $500 million at Bank Hapoalim in New York. ``If you feel the market is going down tomorrow, you might as well sell today.

The government said on Friday April retail sales rose by 0.8 percent, exceeding the 0.2 percent gain Wall Street had expected. In addition, the University of Michigan's consumer confidence index rose unexpectedly in May, suggesting consumer spending may be sustained despite an economic slowdown.

Technology stocks were especially weak, reflecting the gradual selling since April's big advance. Cisco Systems fell 48 cents to $18.57, while Intel dropped 53 cents to $27.41.

Non-technology issues fared better, including banker J.P. Morgan, up $1.20 at $47.64.

Also Monday, SunTrust Banks fell $4.81 to $60 on news it made a $14.7 billion bid for Wachovia, a move that could derail First Union's planned $12.5 billion purchase of the North Carolina bank. Wachovia rose $3.85 to $64.75, while First Union was up 56 cents at $30.58.

Trading activity was muted throughout the session, with preliminary figures suggesting volume would rival Friday, when both the Nasdaq Stock Market and New York Stock Exchange recorded their slowest days of 2001.

Advancing issues led decliners 8 to 7 on the NYSE. Volume was 848.89 million shares, compared with 894.07 million Friday.

The Russell 2000 index slipped 0.72 to 486.64.

Overseas, Japan's Nikkei stock average slid 1.2 percent. Germany's DAX index fell 1.2 percent, Britain's FT-SE 100 lost 3.5 percent, and France's CAC-40 fell 1.4 percent.