NEW YORK (CNNfn) - U.S. stocks snapped a three-session winning streak Monday as investors wary about weak corporate profits sold technology companies that report quarterly results this week.
Decliners included Intel, Sun Microsystems, Nokia and IBM. All four companies are expected to post falling earnings in the days ahead. Comments from Applied Materials didn't help. The company's CEO said weak spending on chip equipment may continue.
"I just don't see any upside surprise in terms of a second half recovery," Robert Barbera, chief economist at The Hoenig Group, told CNNfn's Street Sweep.
Stocks rallied last weak amid optimism that the worst news about slowing profits had passed. But companies such as Bank of New York Monday dashed some of those hopes by missing profit targets.
Still, shares of Citigroup and Bank of America rose after both financial firms posted a profit that topped forecasts. And drug stocks also gained.
But Ted Weisberg, trader at Seaport Securities, told CNNfn's Market Call that, to rally, the market needs signs that the worst news about slowing profits has passed.
When it comes to news, investors won't go wanting. Earnings tracker First Call estimates that 2,000 companies will report results for the June quarter this week. Sixteen are Dow components whose numbers could shed light on a cloudy business outlook.
The Dow industrials dropped 66.94 points, or 0.6 percent, to 10,472.12, widening its annual loss to 3 percent. The Nasdaq composite index fell 55.67, or 2.7 percent, to 2,029.12 and is down 18 percent this year. A broader index, the S&P 500, dipped 13.23, or 1.1 percent, to 1,202.45, widening its 2001 loss to 9 percent.
More stocks fell than rose. On the New York Stock Exchange, declining issues topped advancing ones 1,879 to 1,187 as 1 billion shares traded. Nasdaq losers topped winners 2,214 to 1,442 as 1.5 billion shares changed hands.
In other markets, the dollar rose versus the euro and yen. Treasury securities rose.
Applied difficulty
Applied Materials (AMAT: down $4.41 to $41.95, Research, Estimates) tumbled amid worries about the health of the chip industry. CEO James Morgan told CNNfn's Market Call that he hasn't seen an increase in orders for semiconductor equipment.
"Our customers are working off their inventories," said Morgan, who was attending an industry conference in San Francisco. There, analysts said he made similar remarks.
"In our view, management was setting the stage for the possibility of losses in the current downturn," Byron Walker, who covers Applied for UBS Warburg, wrote in a note to clients.
Intel (INTC: down $1.06 to $29.13, Research, Estimates), the No. 1 chip maker, fell ahead of its profit report due Tuesday. The company is expected to see profits drop 80 percent to 10 cents a share.
Earnings at Sun Microsystems (SUNW: down $0.63 to $15.01, Research, Estimates), the big server maker, are forecast to have fallen 84 percent.
Nokia (NOK: down $1.13 to $17.17, Research, Estimates), the No. 1 mobile phone maker, could see a 26 percent drop in its earnings per share, if analysts' consensus numbers are accurate.
On the Dow, Caterpillar (CAT: down $2.11 to $50.37, Research, Estimates), IBM (IBM: down $0.71 to $107.82, Research, Estimates), and International Paper (IP: down $0.42 to $38.23, Research, Estimates), all fell ahead of their profit reports this week; all are expected to show a decline in profitability.
According to First Call, second-quarter profits are expected to have fallen 18 percent for the worst performance since the second quarter of 1991, when earnings tumbled 24.2 percent.
"I looks like we've got our work cut out for us to turn psychology around," David Briggs, head of equity trading at Federated Investors, told CNNfn's Street Sweep.
But investors are hoping that stocks, which rose last week, will do so again if companies say their business outlook is improving. Some reports seemed to support this Monday.
Citigroup (C: up $0.29 to $49.15, Research, Estimates), the nation's biggest financial services firm, said second-quarter profit rose to 74 cents a diluted share, topping forecasts.
The No. 3 bank in terms of assets, Bank of America (BAC: up $1.13 to $61.38, Research, Estimates), reported earnings of $1.24 a diluted share, also ahead of estimates.
Continental Airlines (CAL: up $1.12 to $52.12, Research, Estimates), the No. 5 airline, said its earnings fell to 74 cents a diluted share but were well above forecasts.
Can it get worse?
Bulls say the mostly dismal profit numbers expected in the coming days already are reflected in stock prices, which have been sliding for more than a year.
"As the earnings come through in the next couple of weeks, they won't be any worse than what the companies have said so far," Ray Dirks, senior analyst at Dirks & Co., told CNNfn's Before Hours.
Still, Bank of New York (BK: down $6.40 to $43.00, Research, Estimates) reported second-quarter earnings of 52 cents a share, a penny less than consensus estimates, and said that future earnings could fall slightly short of expectations if weak market conditions persist.
On the economic front, fresh data signaled that unsold goods are not piling up. Inventories at U.S. businesses were unchanged in May, the government said Monday. But the Commerce Department revised its reading for April, saying inventories fell 0.2 percent in the month.
"These data suggest that a bottoming in economic activity is taking place, but that a bit more inventory adjustment is needed to insure a re-acceleration in growth," said Steven Wood, economist at FinancialOxygen.com.
Among the session's other tech losers, Sanmina (SANM: down $2.38 to $19.76, Research, Estimates) tumbled after the contract electronics manufacturer said it will acquire SCI Systems (SCI: up $1.28 to $26.45, Research, Estimates), a contract manufacturer for electronic components, in a stock deal valued at about $6 billion.
Biotechs Amgen (BGEN: down $1.96 to $49.45, Research, Estimates) and Biogen (BGEN: down $1.96 to $49.45, Research, Estimates) also fell. Robertson Stephens downgraded biotech Chiron (CHIR: down $3.00 to $43.64, Research, Estimates) after the FDA said last week that it needed more information before it would approve the company's blood-testing system.
Traditional drug makers held up better. Merck (MRK: up $1.48 to $62.98, Research, Estimates) and Johnson & Johnson (JNJ: up $0.68 to $53.73, Research, Estimates) both report quarterly profits this week. 
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