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Dow falls 138.06; Nasdaq at record on tech earnings

NEW YORK: The Nasdaq market again zipped to a high on Thursday while the Dow Jones index slumped for the third straight day as Wall Street used strong earnings as an excuse to shift out of "old school" issues into technology stocks.

"This is quick and vicious," said Chris Dickerson, analyst at Global Market Strategists Inc. "The money is going into tech stocks. It is clear that they are meeting or beating estimates."

The Nasdaq composite index closed up 38.22 points, or 0.92 percent, at 4,189.51, on its busiest day ever with volume at a record of about 1.84 billion shares. It was the technology-rich index's second all-time closing high in a row and its third record this year.

Buoying the Nasdaq were stocks such as Apple Computer Inc., which climbed 6-15/16 to 113-1/2 after the computer maker reported quarterly earnings that beat Wall Street's expectations. Computer makers in general gave the index a big boost with Standard and Poor's computer hardware index up 3.67 percent.

The Dow Jones industrial average, meanwhile, dropped 138.06 points, or 1.20 percent, to 11,351.30, marking its third straight day of losses. It is now about 3 percent off its high of 11,722 reached last Friday before the slide began.

Hurting the Dow were graybeard stocks such as aluminum company Alcoa Inc., which eased 4-9/16 at 73-9/16 on concerns that its decision to restart some idle aluminum capacity would drive down the price of the metal.

Diversified manufacturer Minnesota Mining & Manufacturing Co. sagged 3-11/16 to 95-1/8.

Intel Corp., the world's largest chip maker and a Dow component since November, fell 4-7/16 to 95-5/8 in Nasdaq trading after a run-up in its stock and news that a rival may have expanded its presence in the chip market.

Countering the downtrend in the 30-stock Dow index was International Business Machines Corp., the world's largest computer maker, which rose 6-3/8 to 121-7/8 after topping earnings forecasts that were earlier guided lower by the company on fears that the year 2000 computer bug would hurt its bottom line.

"Investors are looking forward to seeing technology growth earnings that aren't going to be impacted, whether we have interest rates going up or down by 100 basis points," said Richard Cripps, chief investment strategist at Legg Mason Wood Walker in Baltimore. "Investors are still increasingly attracted to technology stocks and Internet stocks. In terms of the decline of blue-chip stocks, it is just a classic case of 'sell on the news' and profit-taking."

Concern that the Federal Reserve will raise interest rates significantly this year to counter the threat of inflation have hurt some blue chips in recent days.

In general, computer hardware makers, semiconductors, natural gas and telecommunications companies were up while retail, gold, air freight, chemicals and speciality healthcare companies were down.

The broader Standard & Poor's 500 index slipped 10.33 points, or 0.71 percent, to 1,445.57.

In the broader market, declining shares were beating advances 18 to 12 with more than 1.10 billion shares traded on the New York Stock Exchange. There were 125 stocks at new lows and 95 at new highs.

On the Nasdaq, declining issues edged out declines by 21 to 20 with 391 shares hitting new highs and only 75 making new lows.

In addition to IBM and Apple, other shows of strength in the technology sector came from Internet service provider America Online Inc., which rose 3/16 to 64-3/16 after its profits beat Wall Street's expectations.

Semiconductor company Advanced Micro Devices Inc., meanwhile, slipped 1-3/16 to 38-1/8 despite earnings that topped expectations. "Those were four major companies that beat the Street," said Larry Wachtel, a market analyst at Prudential Securities Inc.

TheStreet.com's Internet index was up a faint 1.14 percent.

In economic news, the US trade deficit hit a new high of $26.5 billion in November due to strong consumer demand, surging imports from Canada and Europe and the highest oil prices in nearly three years.

In addition, new jobless claims also fell by a more-than-expected amount for the week ended Jan. 15.

Both reports added to evidence that the US economy remains robust, still on track to hit its longest expansion in history in February.

The US Treasury 30-year bond weakened late in the day, falling 8/32 to push the yield up to 6.74 percent -- matching highs reached Tuesday, which had not been since since July 1, 1997. The bond yield ended at 6.72 percent on Wednesday.

The bond market reacted to a Federal Reserve governor's warning that US economic growth and output were running at rates that cannot long be sustained without fuelling inflation.

Elsewhere in earnings news, General Motors Corp. was up 3/4 at 82-1/4 after the world's top car maker and Dow component reported earnings that beat expectations.

So far, earnings have been solid, with 12 of the 30 companies in the Dow index having reported, and all but industrial conglomerate Honeywell Inc. beating expectations, according to First Call/Thomson Financial.

Honeywell matched Wall Street's estimates.

Sears Roebuck and Co., which got bumped from the Dow average last year, was down 1-11/16 at 32-1/16, despite reporting a 34 percent rise in quarterly profits and a positive outlook for the rest of the year.

Legato Systems Inc., the most actively traded Nasdaq stock, was down 23-7/8 at 29-3/4 after the network storage software company missed Wall Street's profit expectations.

Shares of the world's largest telecommunications equipment maker Lucent Technologies Inc. rallied 2-1/2 to 53-5/8 ahead of its earnings announcement after the close. -Reuters