Dow Registers Biggest Drop in 2 Months

Worries about corporate earnings in a slowing economy hammered major financial issues and other “old economy” stocks Friday, driving the Dow Jones industrial average to its biggest loss in two months.

But many technology stocks gained, as investors hunted for companies that may show good growth even amid a broad economic slowdown.

The Dow slumped 265.52 points, or 2.5%, to 10,449.30, led lower by J.P. Morgan and American Express on rising concerns about credit problems in an apparently weakening economy. Morgan dropped $8.56 to $117.94 and AmEx lost $4 to $51.50.

It was the Dow’s largest one-day loss since the market’s mini-crash on April 14.

But the tech-dominated Nasdaq composite index rose 14.82 points, or 0.4%, to 3,860.56.

Some individual tech sectors were particularly hot, including biotech and semiconductor issues.

For the week the Dow fell 164.76 points, or 1.6%. The Nasdaq eased 0.4%.

With increasing evidence that the economy is slowing, investors are growing more worried about corporate earnings.

That was brought home by announcements Thursday by two banks--Wachovia and UnionBanCal--that they are facing a growing number of bad loans.

Wachovia plunged $13.13 on Thursday and lost another 63 cents on Friday to $56.44. UnionBanCal slid $1.81 on Thursday and dived $8.75 to $19.94 on Friday.

Most other banks tumbled Thursday and continued sliding Friday.

Still, “There’s not a great fundamental reason for the whole sector to be down so much,” argued Arthur Hogan, chief market analyst at Jefferies & Co. “But it’s a momentum-driven sector, and some people obviously feel that profits are going to come under pressure.”

Overall on Friday, losers topped winners by 16 to 13 on the New York Stock Exchange and by 20 to 18 on Nasdaq. Trading volume rose, in part because it was a so-called triple-witching day--marking the quarterly expiration of stock and index options and index futures contracts.

Also weighing on the blue-chip sector was troubled Xerox’s announcement that its earnings will again fall short of expectations.

Among other big-name stocks, Honeywell fell $2.38 to $48.50, GM lost $2.25 to $62.81 and Wal-Mart lost $1.63 to $53.88.

But many technology stocks showed new life. Rambus helped energize chip-related stocks, soaring $26.69 to $83.38. Other winners included Vitesse Semiconductor, up $2.94 to $78.44; Cypress Semiconductor, up $1.38 to $47; and Gateway, up $3 to $57.56.

Biotech stocks also continued to gain. Immunex leaped $7.25 to $44.69, Human Genome Sciences rose $5.88 to $133.50 and Myriad Genetics rose $18.19 to $135.25.

“Something to take heart in is that the Nasdaq is hanging in there even after it’s risen substantially in the past two weeks,” Hogan said. Analysts said many investors are still waiting to see whether the Federal Reserve will raise interest rates at its June 28 meeting.

A growing number of analysts believe the Fed will leave interest rates unchanged. But the view is not unanimous, and some analysts say the Fed may still think that more needs to be done to make sure inflation is not revived.

On Friday, bond traders continued to bet the Fed is done raising rates: Treasury yields fell across the board. The 2-year T-note yield fell to 6.37% from 6.46% Thursday. The 10-year T-note fell to 5.98% from 6.05%, the first decline below 6% since April 21.

In other markets, oil prices eased, while the euro jumped against the dollar.

Market Roundup, C4