US investors lock in the gains

Tech stocks extended their decline today as United States investors locked in gains following disappointing results from Computer Associates.

Drug shares, hit hard the previous session, rebounded on strong earnings from Eli Lilly and Bristol-Myers.

Analysts said investors were being mostly cautious after sending the market’s major indexes to 52-week highs last week. Many wanted to see not only solid earnings but also better-than-expected revenue and outlooks before making major stock purchases.

“The earnings numbers are pretty good, but the large run-up in stocks this year discounts a lot of that,” said John Caldwell, chief equity strategist for McDonald Financial Group. “The bottom line is the market still looks relatively expensive.”

The Nasdaq composite index dropped 12.56, or 0.7%, to 1,885.51, following a decline of 42.83 on Wednesday.

Blue chip shares finished modestly higher.

The Dow Jones industrial average closed up 14.89, or 0.2% at 9,613.13, following a two-day loss of nearly 180 points. Earlier in the day, the Dow fell as much as 46.51 points.

The Standard & Poor’s 500 index rose 3.38, or 0.3%, to 1,033.74.

Computer Associates International Inc. dropped 2.13 dollars to 23.02 dollars after the software maker reported a wider quarterly loss and said this quarter’s revenue will be lower than expected.

Sony Corp fell 2.66 dollars to 34.49 dollars after the electronics and entertainment giant said earnings slid by 25% in the fiscal second quarter, citing in part losses from disappointing movie box office performance.

KLA-Tencor Corp. slid 4.56 dollars to 53.49 dollars after the maker of semiconductor production equipment said quarterly income fell 27%.

A sharp sell-off in Japan also pressured US shares.

Tokyo stocks slid 5.1% on the US dollar’s weakness against the yen as well as Wall Street’s recent declines on earnings disappointments.

It was Japan’s biggest single-day decline since September 12, 2001 – the day after the terrorist attacks.

After pushing stocks mostly higher since mid-March, US investors are now cashing in gains on any hints of negativity. Analysts say it will be difficult for stocks to move substantially higher without a series of stunning profit outlooks or strong economic reports.

“There was a speculative run-up ahead of the earnings season,” said Hank Herrmann, chief investment officer at Waddell & Reed Financial, a mutual fund company. “Now, if you only beat estimates modestly, stocks are going to go down. If you beat significantly, you do get some additional move on the upside.”

“Most companies are meeting or beating in an already anticipated way … so investors are taking a breather” from buying, he said.

Drug shares were among the winners today after heavy losses Wednesday. Eli Lilly & Co. rose 4.32 dollars to 65.10 dollars after reporting third-quarter profits that met estimates. And Bristol-Myers Squibb Co. gained 85 cents to 25.10 dollars after notching a doubling of third-quarter profits that beat analysts’ expectations.

An upbeat government report on employment, meanwhile, helped limit losses. The Labor Department said new jobless claims fell last week by a seasonally adjusted 4,000 to 386,000. It was the lowest level since September 20 and the third straight week that claims have been below 400,000, a level associated with a weak job market.

Microsoft Corp edged up 2 cents to 28.91 dollars in advance of the software maker’s quarterly earnings report, which was due out after the close of markets.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange. Volume was heavy.

The Russell 2000 index, a barometer of smaller company stocks, fell 2.67, or 0.5%, to 510.48.