NEW YORK (CNN/Money) -
Weakness in technology stocks pushed the Nasdaq to another six-year low Thursday, while anxiety over Friday's September jobs report and a slump in financial issues punished the broader market.
Stocks meandered in lackluster trade for much of the session, swinging on either side of breakeven before ending the day lower. The markets have now fallen in four of the last five sessions.
The Dow Jones industrial average (down 38.42 to 7717.19, Charts) lost 0.5 percent, more than erasing a nearly 200-point gain after a positive report on the services sector.
The Nasdaq composite (down 21.74 to 1165.56, Charts) fell 1.8 percent while the Standard & Poor's 500 index (SPX.X: Research, Estimates) lost 1.1 percent. It was the lowest close for the Nasdaq since mid-September 1996.
The Institute for Supply Management (ISM) services index rose to 53.9 from 50.9 in August, compared with a forecast for a rise to 51.4. The sign of continuing growth, in contrast to the weakness in manufacturing reported Tuesday, gave stocks a brief boost but the rally faded.
Investors largely shrugged off the latest data on weekly U.S. jobless claims -- which showed an increase -- in anticipation of Friday's key September employment report, expected to show that unemployment ticked back up to 5.9 percent last month from 5.7 percent in August.
"The main catalyst that people are looking at is tomorrow's jobs report," Gail Dudack, chief investment strategist with SunGuard Institutional Brokerage told CNNfn's Street Sweep. "While there's a mix of many things going on in the market, the key thing to an economic recovery is jobs and income. That's why tomorrow's number is critical."
"I think there is risk in the market. If there is weakening in the economy, then an earnings recovery gets pushed out further into 2002," Dudack added.
Bank warning gives financials fits
Financial issues Citigroup (C: down $1.09 to $28.51, Research, Estimates), Merrill Lynch (MER: down $1.91 to $31.24, Research, Estimates), Lehman Brothers (LEH: down $3.00 to $46.14, Research, Estimates) and J.P. Morgan Chase (JPM: down $0.63 to $17.62, Research, Estimates) lost value in the wake of a third-quarter warning from Bank of New York (BK: down $2.81 to $23.95, Research, Estimates), due to investment losses and bad loans the company made to telecommunications companies.
J.P. Morgan last month warned of lower third-quarter earnings because of bad loans.
"The banks [didn't] do well after the dismal news from Bank of New York. Significant weakness in that sector [also hurt] the broader market," said Angel Mata, head of equity trading with Legg Mason. "People are getting worried about the quality of corporate loans and credit problems for the sector.
But SBC Communications (SBC: up $1.62 to $21.80, Research, Estimates) emerged a winner on the Dow, benefiting from bullish comments by Goldman Sachs that the telecom services sector could expect better news over the next six months for the regional bells.
Bad news across the technology group caused some headwind for the tech-heavy Nasdaq.
Advanced Micro Devices (AMD: down $1.74 to $3.63, Research, Estimates), the world's No. 2 chipmaker, said it expects a substantial operating loss in the third quarter, due to weakness in the PC market and a backlog in chips inventory.
Credit Suisse First Boston and UBS Warburg reacted by widening their loss-per-share estimates for the chipmaker and lowering their price targets on the stock.
Other chip stocks, including KLA-Tencor (KLAC: down $2.03 to $27.42, Research, Estimates), Applied Materials (AMAT: down $1.00 to $11.50, Research, Estimates) and Novellus Systems (NVLS: down $1.70 to $20.45, Research, Estimates), trended lower.
Lehman Brothers analyst Dan Niles said he now expects No. 1 chipmaker Intel (INTC: down $0.46 to $13.84, Research, Estimates)'s 2002 and 2003 revenue to slip slightly on the back of AMD's warning.
In a morning note, Merrill Lynch expressed caution on the enterprise hardware sector, saying it expects third-quarter results to come in at or slightly weaker than expectations. Merrill also said it expects a muted performance for the fourth quarter.
The brokerage said the third quarter will show "strains of a difficult macroeconomic environment" and a continued hesitation by customers to increase spending on information technology.
Meanwhile, Veritas Software (VRTS: down $2.77 to $11.73, Research, Estimates) took a hard knock after announcing that its chief financial officer had resigned after the company discovered he had falsified his resume.
Goldman Sachs (GS: down $2.65 to $62.90, Research, Estimates) was punished after congressional investors found the brokerage offered shares of initial public stock offerings to executives of at least 20 companies that steered lucrative investment-banking business to the firm.
Chemical maker DuPont (DD: up $0.43 to $37.74, Research, Estimates) struggled to support the Dow industrials earlier in the session after announcing that it expectsto top analysts' estimates for its third quarter. DuPont's news came a day after sector mate Dow Chemical (DOW: down $0.56 to $26.69, Research, Estimates), the nation's largest chemical maker, warned of flat earnings in the third quarter.
European markets closed lower. Asian-Pacific stocks finished mostly down, with Japan's Nikkei index again touching a 19-year low.
Treasury prices fell, with the 10-year note yield at 3.69 percent. The dollar fell against the yen and the euro.
Light crude oil futures fell 73 cents to $29.76 a barrel in U.S. trading. Gold edged lower.
Market breadth was negative. On the New York Stock Exchange, decliners edged advancers about 2-to-1 as 1.6 billion shares traded. On the Nasdaq, losers topped winners about 2-to-1 as 1.6 billion shares changed hands