Bad news from Intel pushes tech stocks lower

Technology shares sank today on disappointing news from Intel, briefly pushing the Nasdaq composite index into negative territory for the year despite a brighter forecast from wireless equipment maker Qualcomm.

Blue chips also slumped after the US Army cancelled a helicopter programme, sending Boeing and United Technologies lower.

A multibillion acquisition by Citigroup and strong sales at Wal-Mart gave those stocks a boost, but failed to energise the markets. Federal Reserve Chairman Alan Greenspan’s remarks to a credit union conference that American consumers are in “good shape” following a wave of mortgage refinancings also had little positive effect.

The fourth straight day of declines reflects lingering concerns over valuations and rising questions about whether the economic recovery will hold, said Stephen Massocca, president of Pacific Growth Equities. There are also growing worries on Wall Street about the upcoming presidential election, he said.

“Nothing in the headlines today was able to allay those concerns,” Massocca said. “We’ve also not seen a significant correction since March, and a lot of people are concerned that we’re due for one, and they’re pulling back while they can.”

The Nasdaq shed 30.41, or 1.5%, to 2,007.52, after falling 0.8% last week. The tech-heavy index was up just 0.2% for the year, having closed 2003 at 2003.37.

The other major indexes were narrowly lower. The Dow Jones industrial average gave up 9.41, or 0.1%, to finish at 10,609.62, after a weekly decline of 0.1%. The Standard & Poor’s 500 index lost 3.12, or 0.3%, to 1,140.99, following a 0.2%.

The Nasdaq’s weakness is “obviously part of a larger picture of market correction,” said Richard E. Cripps, chief market strategist for Legg Mason of Baltimore. But the economy’s underlying strength and the prospect of continued corporate earnings growth are likely to mitigate the long-term impact, he said.

“It’s a consequence of how far, how fast and how widespread the gains have been for the last 10 weeks,” Cripps said. “I’d say we’re going through a sentimental correction, not one precipitated by fundamentals.”

Intel Corp. dropped one dollar to 29 dollars after the chipmaker reported in federal filings that the Internal Revenue Service was examining its tax returns for 2001 and 2002. The Dow component said it did not believe the outcome of the audits would hurt its bottom line, but its losses still added to selling pressure on the Nasdaq market.

Also contributing to the Dow’s decline was the US Army’s decision to cancel its Comanche helicopter programme, which sent shares of defence contractors tumbling. Boeing Co. fell 72 cents to 43.62 dollars, and United Technologies Corp. shed 2.82 dollars to 93.80 dollars.

Qualcomm Inc. stood out as one of the day’s biggest winners, however, surging 3.03 dollars, or 5.1%, to 62.43 dollars after raising profit estimates for the second quarter due to increased demand for its modem and radio frequency telephone chips.

Citigroup gained 43 cents to 49.32 dollars after saying it had agreed to buy KorAm Bank for up to 2.73 billion dollars, marking continued consolidation in the financial sector. The acquisition of KorAm, South Korea’s sixth-largest lender, would be the largest foreign investment yet in that country’s banking industry.

Wal-Mart Stores Inc. rose 62 cents to 60.05 dollars after reporting that February sales are tracking near the high end of its estimates. The world’s largest retailer said spring clothing sales were particularly encouraging last week.

Decliners included Lowe’s Cos. Inc., which lost 1.71 dollars to 56.67 dollars, despite beating forecasts with strong fourth-quarter earnings. The world’s second-largest home improvement retailer also offered an upbeat outlook for the year, but some analysts questioned the potential for future sales later in the year. Lowe’s top competitor, Home Depot, ended the day down 32 cents at 35.38 dollars, ahead of its earnings report, due tomorrow.

Decliners outnumbered advancers about 9 to 5 on the New York Stock Exchange. Volume was light, with 1.38 billion shares traded, compared with 1.47 billion shares on Friday.

The Russell 2000 index, which tracks smaller company stocks, plunged 9.69, or 1.7%, to 570.20.