NEW YORK (CNN/Money) -
Declines in tech and telecom dragged the Nasdaq down Thursday, while the broader market closed little changed, as investors opted to take some profits in response to the morning's group of largely upbeat earnings.
The Nasdaq composite (down 23.44 to 2119.01, Charts) lost 1.1 percent, the Standard & Poor's 500 (down 3.68 to 1143.94, Charts) index lost 0.3 percent and the Dow Jones industrial average (down 0.44 to 10623.18, Charts) closed virtually unchanged. Both the Dow and S&P had closed at nearly two-year highs Wednesday.
"The companies have been coming through with the earnings, but everybody knew that," said Peter Green, a market analyst at MKM Partners. "People have become accustomed to the earnings being good. There's no surprise element. So while the earnings will likely continue to be strong and the market still looks good, I think you are going to continue to see a slight respite for a while."
After the close, Microsoft (MSFT: down $0.29 to $28.01, Research, Estimates) reported mixed results. The company earned 34 cents per share after charges in its fiscal second-quarter, more than what analysts were expecting and up from a year ago. However, the company also said that unearned revenue, which measures sales from software license renewals the company expects to book in upcoming quarters, declined from the fiscal first-quarter. The stock edged lower after the close.
Stocks were primed for a slightly lower open Friday, according to futures. There are no economic reports due Friday. Earnings reports due before the open Friday include Schlumberger (SLB: Research, Estimates) and Northwest Airlines (NWAC: Research, Estimates), although neither are typically market moving.
The major indexes will need to rally Friday in order to finish up for the week.
Earnings were mixed Thursday, leading to a seesaw market, with the techs exerting the most pressure. However, the session's action also continued the trend of the week, with investors taking some money out of technology and a few other sectors that have gained a lot recently and putting it into some of the blue chip stocks that would seem to have more room to rise.
Market breadth was mixed on heavy volume. Winners edged losers on the New York Stock Exchange, where 1.68 billion shares changed hands. On the Nasdaq, decliners topped advancers by a five to three margin as 2.32 billion shares traded.
Techs lead downturn
Lucent Technologies (LU: down $0.37 to $4.05, Research, Estimates) led the telecom and networking declines, losing more than 8 percent, with the company suffering under a Smith Barney Citigroup downgrade to "sell" from "hold."
The sector had been particularly buoyant lately, stemming from an upbeat forecast out of Juniper Networks (JNPR: down $0.45 to $29.17, Research, Estimates) last week. The pullback also took JDS Uniphase (JDSU: down $0.43 to $4.95, Research, Estimates) 8 percent lower.
Nortel (NT: down $0.49 to $6.34, Research, Estimates) saw its shares shed more than 7 percent after it announced a plan to divest all of its manufacturing facilities in an effort to put greater focus on new product development . Nortel said it was in talks with Flextronics International (FLEX: up $0.18 to $17.50, Research, Estimates) about the planned divestiture.
Dow component AT&T (T: down $0.85 to $20.40, Research, Estimates) slipped 4 percent after it posted lower fourth-quarter net income as weak customer demand continued to hurt its revenue. However, its earnings per share were more than what analysts had expected.
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Sandisk (SNDK: down $9.84 to $59.75, Research, Estimates) fell more than 14 percent after the company warned that tough pricing in the flash memory card market will hurt its gross margins in the year ahead. The comments overshadowed an otherwise largely positive quarterly report, in which the company reported stronger earnings than a year earlier.
A variety of chip stocks also declined, including Intel (INTC: down $0.57 to $31.63, Research, Estimates), and added to the pressure on the Nasdaq.
"They are using all kinds of reasons for the pullback today," said Robert Long, vice president of investments at Melhado, Flynn & Associates. "But I think this is just a short-term selloff."
A few bright spots
Shares of American Airlines' parent AMR (AMR: up $2.30 to $16.85, Research, Estimates) rallied nearly 16 percent after the company reported a narrower fourth-quarter loss from a year earlier on cost-cutting aimed at sparing it from bankruptcy. Following the news, Lehman Brothers, Credit Suisse First Boston, Deutsche Bank Securities and others issued bullish 2004 earnings forecasts for the company.
eBay (EBAY: up $4.94 to $69.32, Research, Estimates) climbed close to 8 percent after it reported earnings late Wednesday that were higher than analysts expected. The online auction company made 24 cents per share in the fourth quarter, up from a year earlier and two pennies more than the average Wall Street forecast.
Dow component Eastman Kodak (EK: up $3.49 to $30.95, Research, Estimates) shot nearly 13 percent higher after the company reported earnings per share that rose from a year earlier and topped estimates. Kodak also said it will cut 20 percent of its work force and take charges of between $1.3 billion and $1.7 billion over the next three years as it tries to move away from its traditional film photography business and into digital photography and printing.
Adding some support to the market, the Labor Department said the number of Americans filing new claims for unemployment benefits fell last week to 341,000 from a downwardly revised 342,000 the prior week, when economists expected a slight rise.
Treasury prices rose, pushing the yield on the 10-year note down to 3.95 percent from 4.02 percent late Wednesday. The dollar slid against the euro and yen.
NYMEX light sweet crude oil futures rose 22 cents to settle at $34.80 a barrel. COMEX gold fell $1.10 to settle at $410.10 an ounce.