NEW YORK (CNNfn) - Investors hoping to see the Dow industrials finish the week above 10,000 found their hopes quashed Friday, as a plummet in the stock of IBM resulted in sizable losses for the blue chip index as well.
The Dow Jones industrial average, which raced ahead of the 10,000 milestone minutes after the opening bell Friday, retreated once again by afternoon to end the day at 9,903.55 -- down 94.07 points. It was the third time this week the blue chip index failed to hold onto its gains once it topped the 10,000 mark.
Much of the Dow's loss came from a nosedive in the shares of IBM, which plunged after Morgan Stanley Dean Witter lowered its stock price target for Big Blue. Still, the Dow finished the week with a gain of 0.28 percent, edging up to a gain of 7.87 percent for the year.
The Dow started strong but faded
The Dow started the day with a rally, helped by lingering bullish momentum from Thursday and an extra boost from Friday's "triple witching" -- the simultaneous expiration of stock index futures and options and individual stock options that happens once every three months. The event is known to create heightened volatility and increased trading volume in the market, especially in the first and last hours of trading.
But technology stocks never joined the rally, and the IBM news only made things worse, wiping out the Dow's gains and leaving the index almost 100 points below 10,000 by the end of the day.
The blue chip index had conquered 10,000 on three occasions during the week, but much of its strength had come from a limited number of stocks, even within the exclusive club of 30 blue chips. That lack of positive breadth, even among the Dow's components, caused some analysts to raise red flags about the market in the future.
"The narrowness in the market is troubling and that probably means that the short term is not going to be all that exciting," said Scott Wittman, chief investment officer at Vantage Investment Advisors.
"And that is what leads me to the conclusion that while 10,000 is a milestone, it does not herald the next leg up in the bull market. To get the next leg up, we are going to need much broader participation of stocks in the rally," he added.
Emphasizing the nervous tone in the market, breadth on the New York Stock Exchange was heavily negative, with declines leading advances 1,813 to 1,162 as trading volume surged to 919 million shares.
"I think that the prudent investor had better start taking some money off the table," said Lou Ehrenkrantz, market strategist at Ehrenkrantz King Nussbaum.(164K WAV) or (164K AIFF)
The Nasdaq Composite tumbled 41.47 points, or 1.7 percent, to 2,421.49, and the S&P 500 index lost 17.26, or 1.3 percent, to 1,299.29. Still, the Nasdaq finished the week with a gain of 1.67 percent, increasing its advance for the year to 10.43 percent. The S&P 500 index rose 0.36 percent for the week for a gain of 5.70 percent for the year.
Bonds also fell, falling victim to technically motivated selling. The bellwether 30-year Treasury bond traded 1/2 of a point lower in price, for a yield of 5.52 percent.
The dollar dropped against the yen, weighed down by a rally in Japanese stocks overnight. The dollar gained ground against the euro.
Trouble among the techs
Much of the selling on Wall Street began in the technology sector and picked up late in the day after Morgan Stanley Dean Witter lowered its price target for IBM (IBM) to $195 a share from $210, even while keeping its "outperform" rating on the stock.
The news, which had reached the market in the form of a rumor long before Morgan Stanley confirmed it, sent IBM's stock down 9-1/8 to 168-1/2, a move that was largely responsible for the Dow's slide into the red.
Fellow Dow component Hewlett Packard (HWP) dropped 3-1/8 to 70-7/8. Other high-tech high flyers, most of which had been strong in the morning, followed suit. Microsoft (MSFT) fell 1-1/4 to 171-3/16, Intel (INTC) lost 2-13/16 to 119, Cisco Systems (CSCO) dropped 2-3/8 to 104-1/2 and Dell Computer (DELL) shed 2 to 40-1/4.
Among the few tech gainers, Adobe Systems (ADBE) rallied 4-1/4 to 54 after the software maker reported stronger-than expected first-quarter results and predicted it would beat second-quarter forecasts as well. Brokers Pacific Crest and Hambrecht & Quist upgraded the stock.
Transports in reverse gear
A strong rally in the transportation sector Thursday paved the way for a bit of profit-taking a day later, sending the Dow transports index down 94.59 points, or 2.8 percent, to 3,338.48.
Among the losers, shares of AMR (AMR), the parent company of American Airlines, fell 1-5/8 to 60-1/2. The stock rallied sharply Thursday, even after the company announced its first-quarter earnings will fall short of expectations because of a week-long pilot job action in February.
Rival UAL (UAL), the parent of United Airlines, lost 2-11/16 to 74-1/2 and Delta Airlines (DAL) dropped 1-15/16 to 68-5/8.
Solid earnings and merger rumors
The rest of Wall Street focused on positive earnings news from several industries including brokers and sneaker makers.
Financial stocks once again attracted heavy trading, as investors focused on strong earnings in the sector and talk one of the industry's premier members, banking giant Chase (CMB) may have set its sight on a specific takeover target.
Still, despite early strength in the sector, the broader market weakness cast its shadow and most financial shares slipped into the red late in the day.
Chase, long rumored to be desperately in search of a merger partner, saw its stock fall 1-1/4 to 82-5/8. In its April 5 issue due on newsstands Monday, Forbes magazine said the venerable bank is negotiating a deal with another Wall Street blue blood, Merrill Lynch (MER). Merrill's shares lost 1-3/8 to 90-3/4 after rising early in the day.
Meanwhile, Merrill rival Lehman Brothers (LEH) reported its second-best quarterly performance, with earnings jumping 13 percent to $211 million in the first three months of the year. But profit-taking brought Lehman's stock down 2-15/16 to 59-5/16.
Among the Dow's financial members, American Express (AXP) fell 4-1/2 to 123-1/8, plagued by profit taking. Citigroup (C) eased 7/16 to 64-1/4 and J.P. Morgan (JPM) slipped 1-1/16 to 123-1/8.
Strong earnings helped boost the stock of sports shoe maker Nike (NKE). After several quarters of weakened results, the company said its fiscal third-quarter profit rose to 44 cents a share from 25 cents a year earlier and 6 cents higher than Wall Street had expected. The stock rallied 6-1/2 to 61-1/2, a gain of nearly 12 percent. Brokerage Hambrecht & Quist upgraded Nike to "buy" from "hold." BT Alex. Brown upgraded the stock to "buy" from "outperform."
A report in the Japanese newspaper Nihon Keizai Shimbun, suggesting British Telecom (BTY) and AT&T (T) are in talks to buy a combined 30 percent stake in Japan Telecom, sent American depositary receipts of British Telecom up 1-7/8 to 163-1/2. After rising early in the day, however, AT&T, a Dow component, lost 2-5/8 to 79-1/2.
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-- by staff writer Malina Poshtova Zang
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