Stocks fall as Intel rally falters


By ELIZABETH LAZAROWITZ

NEW YORK: US stocks sagged on Friday, eroding strong gains made earlier this week as investors cashed out after a sharp morning rally sparked by upbeat forecasts from the world's largest microchip maker, Intel Corp. 

The market roared higher at the open after Intel raised its revenue forecast for the current quarter, citing stronger demand from computer makers. 

By late afternoon, however, all three major market gauges had stumbled into negative territory. 

Good earnings news in some retail stocks like Nordstrom Inc helped underpin stocks, but traders said the market was unable to gain much upward momentum with many market players away on vacation during the last weeks of summer. 

The market is “just a little tired after the run-up we’ve had,” said Jon Brorson, managing director of growth equities at Neuberger Berman. “People used the strong opening to take some money out of stocks and put it away for a while.” 

Earlier this week, the Dow Jones industrial average posted its highest close in 14 months and the Nasdaq Composite Index climbed to a 16-month high. 

“Stocks have moved back toward their recent highs, in some cases,” said Joseph Stocke, portfolio manager at StoneRidge Investment Partners LLC. 

“It's not too unusual after a period of three years where the market hasn’t done too well for investors to want to lock in profits when they can.” 

The Dow Jones industrial average slumped 74.81 points, or 0.79%, to 9,348.87, and the S&P 500 Index dropped 10.22 points, or 1.02%, to 993.05. After rallying nearly 2% earlier in the session, the Nasdaq Composite Index fell 12.24 points, or 0.69%, to 1,765.31. 

Trading volumes were moderate with about 1.3 billion shares traded on the New York Stock Exchange and about 1.7 billion on Nasdaq. 

All three major indexes ended the week with gains, with the Dow up 0.3%, the S&P 500 up 0.2%, and the Nasdaq Composite up 3.7%. 

In a surprise statement before the open, Intel raised its third-quarter revenue target to a range of US$7.3 bil to US$7.8bil, citing strength at its microprocessor business unit. Its prior revenue target was US$6.9bil to US$7.5bil. It also bumped up its gross profit margin forecast. 

Intel, however, cautioned that demand for communications products remains soft. It also said the rest of its forecasts for the third quarter were unchanged. 

Shares of Intel climbed US$1, or 3.8%, to US$27.39 and led gainers by percentage on the bluechip Dow. 

Its rise helped push the Philadelphia Stock Exchange semiconductor index up 0.9%. 

Nordstrom shares rose US$1.07, or 4.5%, to US$25.07, a day after the upscale department store chain posted sharply higher second-quarter earnings as cost controls boosted margins. 

Apparel retailer Gap Inc reported late on Thursday that its quarterly profit nearly quadrupled as clothing sales grew without a need for aggressive discounting. 

But Gap shares fell 43 cents, or 2.2%, to US$19.22, and analysts said the stock price had already reflected strong quarterly earnings and rising hopes for a sustainable turnaround. 

ScheringPlough Corp also took a hit after it slashed its quarterly dividend by 68% and set plans to cut at least 1,000 jobs and end some executive perks as it battles a cash crunch. 

The drugmaker, already facing federal investigations into its manufacturing and marketing practices and stiff competition for its top medicines, also warned that 2004 earnings per share would be lower than 2003 results. Its shares topped the NYSE's most active list and fell 9.2%, or US$1.52, to US$14.96. – Reuters 

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