NEW YORK (CNNfn) - A steep plunge among technology stocks, renewed fears about Brazil's finances and news that the U.S. trade deficit has widened yet again, took U.S. stock markets sharply lower Thursday.
The technology-charged Nasdaq Composite ended its lengthy record run and suffered the worst damage, shedding 70.77 points, or 2.93 percent, to 2,344.72 on heavy volume.
The Dow Jones industrial average lost 71.83 points to close at 9,264.08. On the New York Stock Exchange, losers outnumbered gainers by a broad margin of 1,939 to 1,128 as 872 million shares traded hands.
The S&P 500 index dropped 21.46, or 1.71 percent, to 1,235.16.
Profit taking after a lengthy rally overwhelmed the technology sector, with stocks of high-tech blue chips losing ground despite a continuous stream of solid earnings. Internet issues also fell victim to selling, despite more talk about a wave of consolidation in the industry.
"So much of what drives the market now is momentum. And the momentum has been with the big tech stocks on the Nasdaq," said Terence Gabriel, stock market strategist at I.D.E.A.
Gabriel believes that the current composition of the Dow 30 -- which features a broad array of manufacturing, consumer, oil and technology stocks -- does not reflect the new driving forces behind the market, namely the enormous growth generated by the high-tech sector. (306K WAV) or (306K AIFF)
Investors looking for reasons to sell turned their eyes to Brazil, where the local stock market fell sharply amid renewed weakness in the country's currency. Those seeking bearish signals at home found some in the trade gap report for November.
The bond market rose, helped by the sharp drop in stocks in Brazil after that country's parliament passed a crucial pension reform bill that was part of a set of legislation aimed at improving the country's financial health. Bonds ignored news that the U.S. trade deficit widened more than expected in November. The benchmark 30-year Treasury bond rose 17/32 of a point in price, for a yield of 5.13 percent.
The dollar climbed against the yen and fell only slightly against the euro.
Day of the techs -- revisited
In stocks, technology shares continued to attract most of investors' interest as the earnings reporting season rolled on with IBM, Sun Microsystems, Gateway and Excite reporting their latest results late in the day. But unlike the boisterous rally of recent days, much of the sector took a beating as investors cashed in on their gains.
Shares of Dow member IBM (IBM) gained 2-1/2 to 197 in regular trading on expectations that Big Blue was about to report yet another strong quarter after the closing bell.
Bullish investors got what they desired when IBM reported fourth-quarter profit of $2.47 a share compared with $2.11 a share a year earlier. Consensus estimates had put IBM's profit at $2.45 a share.
Sun Microsystems (SUNW), also releasing its earnings after the market close, lost 7-1/8 to 98-1/4 in regular trading. Minutes after the closing bell rang, Sun posted operating profit of 67 cents a share in its fiscal second quarter, up from 57 a year earlier. Excluding a one-time item, the company earned 64 cents a share. Market expectations had been for 66 cents. The company also declared a 2-for-1 stock split.
The stock eased further to 97 in after-hours trading.
Gateway (GTW) inched up 3/4 to 59-1/4 in regular trading, as investors geared up to hear what the made-to-order computer firm earned in the past three months. The company said its profit climbed to 81 cents a share from 59 cents a year earlier. Wall Street had expected earnings of 78 cents a share from Gateway.
Other technology blue chips suffered from a bout of profit taking, following a strong run-up most of Wednesday on the heels of Microsoft 's (MSFT) spectacular second-quarter earnings report.
After a strong rally in the stock's price Wednesday, however, investors decided it was time to cash in, and shares of Microsoft dropped 4-5/16 to 158-5/16.
Intel (INTC) lost 4-3/4 to 133-1/2, Cisco Systems (CSCO) shed 4-13/16 to 101-5/16, and Dell Computer (DELL) eased 1-1/8 to 84-3/16.
Elsewhere in the market, shares of Lucent Technologies (LU) tumbled 8-7/8 to 106-5/8 even after the company released better-than-expected earnings and issued a bright forecast for the rest of the year. But investors saw trouble with the company's change in accounting for its pension plan -- a move that gave Lucent a $1.3 billion gain in the latest quarter.
But the stock of United Technologies (UTX) surged 1-15/16 to 113-15/16 after the company reported a 20 percent jump in its fourth-quarter earnings and said it has hired Goldman Sachs to explore the possible sale of UTC's automotive business.
Web portal Excite (XCIT), fresh from its acquisition by @Home (ATHM), reported pro-forma profit of 4 cents a share for the fourth quarter, up sharply from a loss of 26 cents a share in the last quarter of 1997. The company's results met expectations. The stock fell 10-3/4, or more than 11 percent, to 85-7/8 in regular trading.
Finally, shares of Web portal Lycos (LCOS) rallied 12-3/16, or more than 11 percent, to 117 as speculation swirled that the company is the next big takeover target in the Internet sector. However, press reports putting Lycos in talks with potential buyers, including Germany's media giant Bertelsmann, were denied by Lycos President and Chief Executive Bob Davis. In an interview with CNNfn, Davis said he was "far from suggesting that any partnership is imminent."
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-- by staff writer Malina Poshtova Zang
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