New York Cautious outlooks from Microsoft and IBM sent technology stocks tumbling Friday as investors worried that an economic recovery might be further delayed. The tech-driven Nasdaq composite index closed out its worst week since the terror attacks.
Analysts said the sharp drop was to be expected given all the buying investors indulged in late last year when they expected business to turn around quickly in 2002.
The tech sector took the brunt of the selling as the Nasdaq fell 55.48, or 2.8 percent, to 1,930.34 and ended the week down 92.12, or 4.6 percent. The last time the Nasdaq had a bigger weekly percentage decline was Sept. 21-28, when it plunged 16 percent after the Sept. 11 terror attacks.
The market's other major indexes also posted sharp daily and weekly declines. The Dow Jones industrial average sank 78.19, or 0.8 percent, to 9,771.85, with IBM and Microsoft its weakest components. For the week, the Dow fell 215.68, or 2.2 percent.
The downturn reflected the market's disappointment with statements from IBM and Microsoft late Thursday in which both companies said they didn't know if a recovery had started. Although the high-tech bellwethers beat earnings expectations, that wasn't enough for Wall Street, which had been buying on the assumption the companies would confirm a turnaround in progress.
IBM fell $5.65 to $114.25, while Microsoft tumbled $3.76 to $66.10. The selling spread to other technology issues, including Intel, which issued a similarly cloudy forecast earlier this week. The chip maker, also a Dow industrial, fell $1.05 to $33.48.
Blue chips experienced widespread weakness, which analysts attributed to the Enron bankruptcy, caused by questionable accounting procedures. Fears that struggling retailer Kmart would file for bankruptcy protection also weighed on investors.
Enron has been delisted from the New York Stock Exchange, and is selling for pennies a share on the over-the-counter market.
Among blue chips, J.P. Morgan Chase dropped 94 cents to $35.91, Merck fell 60 cents to $58 and Wal-Mart declined 41 cents to $56.35.