Dow falls as investor concern rises

Wall Street sold off today after a cautious outlook from Microsoft increased investor concerns that quarterly earnings do not justify current stock price levels.

Tech stocks suffered the greatest losses, but all three major market indexes notched losses for the week.

The Dow Jones industrials fell as much as 115 points before rebounding somewhat on a burst of late-day buying. Analysts said investors were looking to cash in gains but were remaining largely upbeat about the economic recovery.

“Microsoft disappointed … and that took the market down,” said Larry Wachtel, market analyst at Wachovia Securities. “That’s not to say many companies’ earnings came in line or exceeded, but those got a ’so what’ response. Those that disappoint, that becomes larger than life to investors.”

The Dow closed down 30.67, or 0.3%, at 9,582.46, having gained 14.89 in the previous session.

The technology-dominated Nasdaq composite index declined 19.92, or 1.1%, to 1,865.59. The Standard & Poor’s 500 index fell 4.86, or 0.5%, to 1,028.91.

For the week, the Dow fell 1.4%, the Nasdaq dropped 2.5%, and the S&P fell 1%.

Microsoft fell 2.30 to 26.61 after the software maker reported profits that beat estimates. However, it signed fewer new contracts with customers than it expected. The news weighed on other tech shares, including Intel, which fell 14 cents to 31.08, and Dell, down 37 cents at 36.

While third-quarter earnings have been generally strong, investors are wondering whether stock prices might be too high. Analysts say investors now want to see significantly improved profits and outlooks before sending stocks substantially higher.

Scientific Atlanta slid 6.35, or 18.1%, to 28.68 after the maker of set-top boxes for cable subscribers reported quarterly earnings that came in a penny higher than forecast.

Gateway tumbled 1.48, or 24.3%, to 4.62 after the computer maker notched a third-quarter loss which was worse than Wall Street’s projections.

Cablevision Systems dropped 1.94, or 9.4%, to 18.70 after the company said it would spin off its satellite broadcasting unit to shareholders.

Gainers included AT&T Corp., which climbed 75 cents to 19.91 on reports that it might revive merger talks with BellSouth Corp.

Declining issues outnumbered advancers 8 to 5 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, which tracks smaller company stocks, fell 4.06, or 0.8%, to 506.43.