Increasing Concerns Weigh on Blue Chips

Blue-chip stocks fell Friday after home improvement giant Home Depot warned of disappointing profits and a measure of consumer confidence continued to sink, increasing concern over the slowing U.S. economy.

“The economy is . . . continuing to slow, and I think that took some of the starch and steam out of enthusiasm for owning equities,” said Tom Sparico, managing director of equities at Bengal Partners.

Technology stocks, however, eked out a small gain after an initial surge on upbeat results from Microsoft, telecom equipment maker Nortel Networks and Internet auction site eBay.

The Dow Jones industrial average fell 90.69 points, or 0.9%, to end at 10,587.59. For the week, the Dow was almost flat. It is down 1.8% so far this year, after a 6.2% drop in 2000.

Home Depot, which fell $3.25 to $41, weighed on the Dow. Home Depot warned that its earnings would suffer in the soft economy and that it doesn’t see any improvement in the first half of this year.

The broader Standard & Poor’s 500 index eased 5.42 points, or 0.4%, to 1,342.55.

The tech-laden Nasdaq composite index finished the session almost unchanged, up 1.89 points, or 0.1%, at 2,770.38, after climbing more than 2% at the opening. The Nasdaq was up 5.5% for the week and up 12.1% for the year after last year’s 39% plunge.

Nasdaq’s advance was derailed by computer networker Sun Microsystems, which tumbled $4 to $30.88 in very heavy trading after warning that sales for this year could be less than predicted.

The Dow’s tech components rose, including computer maker IBM, up $2.94 at $111.25, extending Thursday’s gain on strong earnings. Among the Dow’s other tech stocks, No. 1 computer chip maker Intel added $1.38 to $33.56.

Microsoft, a Dow component and Nasdaq heavyweight, jumped $5.50 to $61 after the software maker met Wall Street’s lowered expectations and said it was on track to meet its fiscal year goal.

Nortel, whose results matched expectations, rose $3.31 to $40 and was the most active issue on the New York Stock Exchange. EBay added $3.25 to $50.13 on Nasdaq after reporting earnings that exceeded forecasts and projecting more strong growth for the year ahead.

“If you take all these earnings and throw IBM in the mix from the day before, what you are seeing is that there is some life left in these businesses,” said Kevin Caron of Gruntal & Co. in New York.

But on a more dismal note, Critical Path plunged $11 to $9, or 55%, which made it the largest percentage loser on Nasdaq. The provider of Internet messaging and mail software reported a surprise loss and said it will not turn profitable for another three quarters.

Putting a damper on the wider market was news that U.S. consumer sentiment, as measured by the University of Michigan’s index, tumbled in January after hitting its lowest level in more than two years in December.

The data were a “reality shampoo,” according to one professional trader. Wall Street was expecting a slight rise in the index after the Federal Reserve surprised Wall Street on Jan. 3 with a half-point interest-rate cut to rev up the U.S. economy.

Sources said the Michigan survey’s director noted in the report that the sharp drop over the last two months was the third-largest on record and that such sharp two-month slides had preceded the economic recessions of the early 1990s and the early 1980s.

Traders said Friday’s “double witching,” the expiration of index futures and options, exaggerated the market’s price swings. It also contributed to the day’s strong volume--2.6 billion shares changed hands on Nasdaq alone.

Meanwhile, the recent trend toward better market “breadth” stalled as losers outnumbered winners by 4 to 3 on the NYSE and also by a slim margin on Nasdaq.

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Market Roundup, C5-6