NEW YORK (CNN/Money) - A new round of corporate accounting blowups helped send the Nasdaq composite index to its second-lowest close of the year Friday as investors dumped technology stocks ahead of a long holiday weekend.
But the Dow Jones industrial average continued to outperform, ending higher on the week amid growing demand for less volatile shares.
"Right now, people are more inclined to own blue chips than speculative stocks," said David Briggs, head of equity trading at Federated Investors. "It's a little bit of a valuation play."
The Nasdaq slipped 38.18 points, or 2.1 percent, to 1,805.19, sending it down 0.7 percent on the week and 7.4 percent lower on the year. Up 1.6 percent on the week, the Dow industrials shed 98.95, or 1 percent, to 9,903.04 Friday, widening its annual loss to 1.3 percent.
The Standard & Poor's 500 index fell 12.30, or 1.1 percent, to 1,104.18, narrowing its weekly gain to 0.7 percent. The S&P is off 3.8 percent on the year.
With federal regulators asking about their finances, graphics chipmaker nVidia and video game maker Take-Two Interactive revived fears about questionable bookkeeping that have hammered stocks this year. And IBM fell as much as 5 percent after a published report suggested that the company overstated profits.
"You don't want to sit here going long with stocks and have something happen over the weekend," said Federated's Briggs, who does not expect any significant selloffs next week, a period of few scheduled economic and profit reports.
The market, flat at the open, fell near its lowest levels of the session after the University of Michigan said its index of consumer sentiment fell to 90.9 in February from 93.0 in January, much weaker than forecasts.
On the New York Stock Exchange, losing and winning stocks were nearly even as 1.3 billion shares traded. Nasdaq losers topped winners nearly 3-to-2 as 1.5 billion shares changed hands.
In other markets, the dollar rose against the yen and was little changed versus the euro. Treasury securities advanced. Oil rose and gold prices fell.
Watching the books
Nasdaq's eighth-most active stock, nVidia (NVDA: down $4.81 to $57.35, Research, Estimates), said it's conducting an internal review of its books in response to a Securities and Exchange Commission inquest.
A New York Times article raised accounting questions about IBM (IBM: down $5.00 to $102.89, Research, Estimates), saying the company did not disclose that a unit's sale valued at $300 million was used to lower costs and may have boosted profit. IBM said it did nothing improper.
Shares of Take-Two Interactive (TTWO: down $0.38 to $18.18, Research, Estimates) resumed trading after the video game maker announced it overstated revenue by nearly $20 million and said it is being investigated by the Securities and Exchange Commission.
Insurer Mutual Risk Management (MM: down $1.00 to $2.00, Research, Estimates) said it is delaying release of its 2001 earnings, previously scheduled for Friday, to re-evaluate its numbers.
Almost Family (AFAM: down $4.37 to $10.33, Research, Estimates), which provides adult day health-care services said it will downwardly restate profits because of an accounting error.
The stories were a reminder to investors unnerved by Enron, which restated results before its record-setting bankruptcy last year. But at least one analyst expects that accounting concerns, because of their heavy publicity, have already done about as much market damage as they are going to.
"That, in our opinion, probably suggests we're close to the bottom," Tobias Levkovich, market strategist at Salomon Smith Barney, told CNNfn's Before Hours.
Nasdaq's most active stock, WorldCom (WCOM: down $0.39 to $6.73, Research, Estimates), has lost more than 50 percent of its value this year. The Wall Street Journal said the telecom company suspended three employees and froze the commissions of at least 12 salespeople as part of a broad investigation of an order-booking scandal that boosted sales commissions.
The NYSE's biggest loser, Symbol Technologies (SBL: down $3.39 to $8.40, Research, Estimates), which makes bar-code scanners, warned earnings would miss estimates.
Still, the Dow industrials had plenty of big gainers including DuPont (DD: up $1.40 to $44.90, Research, Estimates), Eastman Kodak (EK: up $0.44 to $29.59, Research, Estimates) and Procter & Gamble (PG: up $0.95 to $84.99, Research, Estimates).
Elsewhere in the Dow, General Motors (GM: down $0.45 to $50.32, Research, Estimates) said it is laying off up to 2,850 workers at two plants because of slowing truck sales and weakened market conditions.
Dell Computer (DELL: down $1.21 to $25.60, Research, Estimates) late Thursday posted a quarterly profit that matched forecasts, and the company affirmed Wall Street's current-quarter financial expectations. Dell, which has been gaining market share during a tough time for the computer business, partially credited "Steven," the popular advertising character who says "Dude, you're gettin' a Dell."
No stock rose more Friday than PayPal (PYPL: Research, Estimates). Shares of the Internet payment service provider rose as high as $22.44, or 73 percent, in its first day of trading after the company sold 5.4 million shares at $13 each Thursday.
Michigan messes investors' heads
With the economy showing signs of stabilization, the Michigan consumer confidence index's first decline since September came as a surprise. The number of new jobless claims has returned to August levels, the housing market remains in decent shape, and the stock market is back to where it was before terrorists attacked the country in September.
But the Nasdaq's 2002 decline is something Ian Shepherdson, chief U.S. economist at High Frequency Economics, attributed to the drop in the forward-looking part of the report.
"Expectations had risen a bit too far, too fast, and were vulnerable to a correction; this is it," said Shepherdson, who forecasts no further declines in expectations.
Industrial output, released before the markets opened, fell 0.1 percent in January, the government said, while capacity utilization slipped to a 74.2 percent, its lowest level in nearly 20 years. The figures were close to expectations.
Separately, producer prices edged up a less-than-expected 0.1 percent in January, the government reported, a sign that inflation is still well under control.
Falling demand for goods has forced businesses to cut prices, a boon for consumers and inflation-wary bond investors. But the trend is tough for companies trying to grow profits, which are expected to decline for a fifth straight quarter. That hasn't happened since 1970.
Next week brings only four trading sessions. U.S. markets are closed Monday for Presidents Day.
John Zimmerman, investment strategist at Bank of America Capital Management, expects two competing forces to stall stocks in the weeks ahead.
"We've had a lot of good economic news and a lot of negative news from companies," Zimmerman told CNNfn's Street Sweep. "We think that's going to persist for a while." 
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