Tech Profit Woes, Mideast Anxiety Weigh on Stocks

Stocks fell Tuesday after analysts cut profit estimates for technology leaders such as Microsoft, while oil and gold prices soared amid escalating Middle East violence and talk of a new Arab oil embargo.

“To me it continues to show the nervousness in the market because we are still susceptible to negative news; bull markets are not,” said Michael Farr, president of money-management firm Farr, Miller & Washington. “The Middle East continues to be a dark cloud over the market. The fear is of a widespread conflict.”

The Nasdaq composite index fell 58.22 points, or 3.1%, to 1,804.40. It was the tech-laden Nasdaq’s lowest close since March 1.

Less tech-centric indexes fared better. The Dow Jones industrial average fell 48.99 points, or 0.5%, to 10,313.71. The Standard & Poor’s 500 index declined 9.78 points, or 0.9%, to 1,136.76.

Losers led winners 3 to 2 on Nasdaq, and by a slim 17-15 margin on the New York Stock Exchange. Volume was light.

Much of the selling was concentrated in a few large technology names on worries about near-term earnings. Goldman Sachs trimmed earnings estimates for software giant Microsoft and for two other big tech names--IBM and Sun Microsystems. Microsoft slid $3.08 to $57.30, Sun lost 58 cents to $8.94, and IBM gave up $1.91 to $100.95.

Goldman said IBM appeared to have a “difficult” first quarter as capital spending remains depressed.

“The worries [about technology stocks] are that everything gets pushed out another quarter,” said Richard Sichel, chief investment officer at Philadelphia Trust Co. “Investors are tired of it, and they’re nervous.”

On the New York Mercantile Exchange, the near-month crude contract rose 83 cents to close at $27.71, after earlier rising as high as $28.10, as market players braced for possible supply disruptions amid escalating violence in the Middle East.

“The [Mideast] conflict is a lingering concern because of a threat of a cutoff in oil supplies,” said Dan Peirce, senior strategist for State Street Global Advisors. “While all indications are that the economy is on a firm recovery path, higher oil prices definitely put a crimp in the vigor of that recovery.”

Shares of many oil companies rallied along with oil prices. The S&P; index of oil and gas producers was one of the best performing sectors in the S&P; 500 with a 1.6% rise. Exxon Mobil rose 55 cents to $44.38 and independent producer Apache gained $1.23 to $59.09.

Longer-term bond yields fell as surprisingly weak economic data eased fears about Federal Reserve interest rate increases. New orders for U.S. factory goods slipped 0.1% to a seasonally adjusted $323.8 billion in February. Wall Street economists expected a 1% pickup in orders. But new orders for costly and long-lasting durable goods rose 1.8%, following January’s 1.6% increase, implying the factory sector is regaining strength.

The yield on the benchmark 10-year Treasury note fell to 5.34% from Monday’s close of 5.43%. But yields on the shortest maturities rose. The yield on the six-month T-bill rose to 2.12% from 2.10%.

In other market news:

* The Amex Gold Bugs index rose 2.3% earlier in the session as gold prices climbed $2.70 to $305.90, but closed down 1% after a bout of profit taking. A number of gold mining companies held gains, though, such as Hecla Mining, up 31 cents, or 14%, to $2.55.

* Drug maker Bristol-Myers Squibb fell $2.16 to $38.24 after it said wholesalers’ inventories of its drugs are too high, which will curb their demand for those medicines this year and hurt the company’s future earnings. Most other major drug stocks were little changed, however.

* Best Buy, whose shares have surged 73% since Sept. 21, lost $4.47 to $75.01. The top U.S. electronics retailer forecast profit this quarter short of estimates.

* Insurance stocks were among the market’s bright spots. American International Group gained $1.34 to $72.24, Progressive rose $2.58 to $169.20 and Cigna jumped $2.51 to $104.54.

Market Roundup, C6-7