NEW YORK (CNNfn) - Battered technology investors suffered another setback Wednesday when the Nasdaq composite index fell to a four-month low on worries that the worst news about slowing profits may lie ahead.
Dell Computer declined more than 4 percent after a brokerage cut profit forecasts for the computer maker. And software maker BEA Systems joined the long list of companies pre-announcing earnings shortfalls.
Non-Nasdaq stocks also suffered. Hewlett-Packard fell ahead of the company's quarterly financial report, which is expected to show a 91 percent profit drop.
The Nasdaq's latest loss – its eighth in nine sessions – brings the index within 281 points of its two-and-a-half-year low hit during the financial crises of late 1998.
"We need earnings to begin to improve," Robert Stovall, market strategist at Prudential Securities, told CNNfn's The Money Gang.
Still, the session saw some notable gainers. Applied Materials, the biggest maker of chip-making equipment, posted a profit that came in ahead of forecasts. And Federated Department Stores, the owner Macy's and Bloomingdale's, said earnings rose above expectations, a sign that consumer spending is holding up.
The mixed news kept the major indexes paralyzed for much of the session before ending lower.
The Nasdaq shed 45.55 points, or 2.3 percent, to 1,918.98. Wednesday's was its lowest close since April 16, when the Nasdaq finished at 1,909.57
Worse, the index fell closer to its 2001 closing low of 1,638, which was the Nasdaq's weakest finish since Oct. 1998.
"This is a market with no inspiration," Robert Fagenson, trader at Van der Moolen Specialists, told CNNfn's Market Call. "We are going nowhere and we are not doing it quickly."
The Dow Jones industrial average dipped 66.22, or 0.6 percent, to 10,345.95, while the Standard & Poor's 500 dropped 8.69, or 0.7 percent, to 1,178.04.
Market breadth was mixed. On the New York Stock Exchange, advancing issues beat declining ones 1,629 to 1,452 as 1 billion shares traded. Nasdaq losers came in ahead of winners 2,132 to 1,539 as 1.4 billion shares changed hands.
The Nasdaq's problems mirror those for the dollar, which fell to its lowest levels since early 2001 against the euro and yen. Treasury securities edged lower.
A tumble resumes
Dell Computer (DELL: down $1.07 to $25.50, Research, Estimates) fell after Credit Suisse First Boston cut the company's profit forecasts for its current fiscal year. Late Thursday, the computer maker is expected to post a fiscal second-quarter profit of 16 cents a share, down from year-earlier figures.
BEA Systems (BEAS: down $1.56 to $17.04, Research, Estimates), a maker of e-commerce software, lowered guidance for rest of the year and
posted fiscal second-quarter profit that beat expectations.
Furniture maker La-Z-Boy (LZB: down $0.43 to $19.80, Research, Estimates) warned of lower profits ahead. So did discount shoe retailer Payless ShoeSource (PSS: down $0.02 to $59.90, Research, Estimates).
Hewlett-Packard (HWP: down $0.76 to $24.10, Research, Estimates) fell ahead of its profit report due Thursday. The computer and printer maker is forecast to post earnings per share down 91 percent from year-ago figures, according to the consensus of analysts surveyed by First Call.
Applied Materials (AMAT: up $0.09 to $43.74, Research, Estimates) offered a rare bright spot. Its fiscal third-quarter profit tumbled, but the chip equipment maker still topped forecasts. Lehman Brothers reiterated its "strong buy" rating on Applied shares and said the company should grow faster than its peers.
Growth has been a problem, particularly among technology companies facing slumping demand for computers, communications equipment and storage systems.
Unlike business spending, consumer purchases have held up. Federated Department Stores (FD: up $0.93 to $38.33, Research, Estimates), which owns Macy's and Bloomingdale's, said its second-quarter profit rose above forecasts.
Wal-Mart Stores (WMT: down $0.36 to $52.00, Research, Estimates) and Home Depot (HD: down $0.11 to $49.19, Research, Estimates) said Tuesday their second-quarter profits did not drop, while the government reported that retail sales in July were flat.
Wall Street this summer has staged short-lived rallies amid hopes that the economy is rebounding. But pullbacks have always followed.
"We had a dull July and August is duller still," said Alan Ackerman, market strategist at Fahnestock & Co. "The market continues to trade in a tight range." Ackerman sees no end to that range until companies say demand for their products is growing.
Inventories shrink
Business appear to be working through stockpiles of unsold goods. Inventories at U.S. companies fell 0.4 percent in June, the government said. But the report showed that sales fell more steeply than they had in nine years.
The government also said that industrial production fell 0.1 percent in July while capacity utilization dropped to 77 percent.
Still, Mike Moran, chief economist at Daiwa Securities, called July's the best performance this year for the production and utilization figures, which have fallen more sharply in past months.
"The results were encouraging, but enthusiasm should be restrained," Moran said.
David Sowerby, vice present of Loomis Sayles, is encouraged by the rising bond market, where yields have tumbled to levels that may draw investors into stocks.
"As a competitive alternative, when bond yields are that low, people are enticed to put their money in the stock market," Sowerby told CNNfn's Market Call.
Drug stocks drew some money Wednesday. Johnson & Johnson (JNJ: up $0.01 to $57.00, Research, Estimates), Pfizer (PFE: up $0.25 to $41.21, Research, Estimates), and Bristol-Myers Squibb (BMY: up $0.02 to $56.16, Research, Estimates) all rose.
And CenturyTel (CTL: up $4.09 to $34.71, Research, Estimates) rallied after rural telecommunications company Alltel (AT: down $4.16 to $56.90, Research, Estimates) launched an unsolicited $9 billion offer including debt.
Bulls are encouraged by the Federal Reserve, which next week is expected to cut interest rates for the seventh time this year. But bears note that cheaper money hasn't helped stocks; the major equity indexes all are lower this year after declining in 2000.
After falling more than 39 percent last year, the Nasdaq is down another 22 percent this year. A broader index, the S&P 500, has fallen 10.7 percent in 2001 following 2000's 10 percent decline. The Dow remains in the best shape. The 30-stock index is off 4.1 percent this year. 
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