NEW YORK (CNN/Money) -
Stocks stumbled Tuesday, as a midday tech decline turned into a full-fledged sell-off as investors took profits in various sectors after the market's six-week rally.
The Nasdaq composite (up 11.45 to 2,126.11, Charts) lost 1.7 percent.
The Dow Jones industrial average (up 53.65 to 10,494.23, Charts) fell 1 percent and the Standard & Poor's 500 (up 5.74 to 1,182.81, Charts) index lost 1.1 percent.
The major indexes spent the morning mixed but turned weaker in the afternoon. The sell-off, which accelerated as the session wore on, was sparked by a mix of technical and psychological factors, said Katie Towshend, chief market technician at MKM Partners.
"We're overdue for a pullback, we've become somewhat overextended in the short term," she said.
The 30-share Dow and the S&P 500 have risen for the last six weeks while the Nasdaq has closed higher for the last seven weeks.
Technology initially led the decline, with a variety of sectors turning weaker, led by software makers, Internet firms and chip stocks.
But the decline soon spread to the broader market, and 28 out of 30 Dow components ended in the red.
After the close, Texas Instruments issued its mid-quarter forecast. The company said it expects fourth-quarter sales and earnings per share to hit the mid range of its previous forecast, due to still middling order trends.
Tuesday's market
U.S. light crude for January delivery fell $1.52 to settle at $41.46 a barrel on the New York Mercantile Exchange.
A few weeks ago, a decline like that might have sparked a stock rally, reassuring investors concerned about global supply issues. But after several weeks of falling oil prices, sliding crude hasn't inspired buying lately, particularly after the recent run.
A number of companies that deal in oil services and production fell as well, and the Philadelphia Oil Services (down 5.60 to 431.91, Charts) index lost more than 2 percent.
In corporate news, a report that J&J is in talks for a $24 billion takeover of Guidant paced a day heavy on deals, while Intel led the list of tech companies providing updates Tuesday on how business has been going during the quarter.
While these developments were positive enough to keep the market in place in the morning, selling took over in the afternoon.
"The markets remain overbought at current levels and could see some profit taking at any time," said Michael Sheldon, chief market strategist at Spencer Clarke. "However, market internals remain very positive, so investors are reluctant to sell much into that. Given this scenario, we are likely to see more gains through the rest of the year, and some consolidation in early 2005."
What moved?
Intel (down $0.47 to $23.01, Research), Cisco Systems (up $0.07 to $19.80, Research) and Hewlett-Packard (down $0.06 to $21.02, Research) held meetings with analysts Tuesday.
Intel management said the chip leader has mostly recovered from the product delays and other problems that hurt its 2004 cost-cutting efforts.
Hewlett-Packard's CEO reportedly said that the company considered breaking up several times, but was not considering it now.
Cisco management said that the company is set to meet Wall Street's forecast for revenue growth of 13 percent this fiscal year.
Fellow chipmaker Advanced Micro Devices (down $0.59 to $22.90, Research) slid 5.5 percent following a pair of brokerage downgrades. Wells Fargo Securities and Deutsche Securities both cut their ratings on the chipmaker, citing valuation concerns due to the big run-up the stock has seen recently.
The Philadelphia Semiconductor (down 5.60 to 431.91, Charts) index, or the SOX, fell 2.1 percent.
Investors also eyed a possibleIBM-Lenovo deal. IBM (up $0.55 to $96.65, Research) is reportedly looking to sell its PC-division to China-based Lenovo for $2 billion as part of a joint venture. News of this initially gave a boost to the techs in the morning, but that interest soon gave out.
In the day's biggest possible deal, healthcare company J&J (up $0.74 to $61.15, Research), a Dow component, is reported by the New York Times to be in advanced discussions with Guidant (up $1.40 to $73.75, Research), which makes devices to treat heart and circulatory illnesses.
Guidant shares rose more than 5 percent in active New York Stock Exchange trade, while J&J shares fell 2.3 percent.
The news initially gave a pop to the health care sector, but that petered out as the session wore on.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers 3 to 1 on volume of 1.52 billion shares.
On the Nasdaq, losers topped winners by the same margin on volume of 2.64 billion shares. It was the Nasdaq's third largest volume day of 2004.
The revised read on productivity was released before the open. Productivity fell to a 1.8 percent annual rate in the third quarter from an initial read of 1.9 percent. Economists surveyed by Briefing.com thought it would rise to a 2 percent annual rate. Productivity stood at a 3.9 percent annual rate in the second quarter.
Treasury prices were little changed, with the 10-year note yield at 4.22 percent, unchanged from late Monday. Bond prices and yields move in opposite directions.
In currency markets, the dollar fell versus the euro and yen.
COMEX gold fell $1.90 to settle at $453.70 an ounce.
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