Fears over weak technology sector in the US

Wall Street closed mixed today after weakness in the technology sector punctured some of the market’s enthusiasm over a report that suggested the economy could still be growing.

But comments from memory chip maker SanDisk about soft sales pulled stocks off their highs and sent tech shares lower.

The Dow Jones industrial average, which had been up more than 100 points, ended well off its highs.

The Conference Board’s leading economic indicators report showed a 0.1% rise for April, following a similar rise in March.

The index, aimed at predicting economic activity in the next three to six months, bolstered investors’ belief that the overall US economy, while weak, is positioned for recovery.

After five months of declines in the leading indicators, some investors were concerned that March’s increase was an anomaly – so April’s advance was met with relief, said Hugh Johnson, chief investment officer of Johnson Illington Advisors.

But technology shares tugged at the market after SanDisk issued its cautious comments at JPMorgan’s technology conference today, said Neil Massa, senior trader at MFC Global Investment Management in Boston.

SanDisk fell 2.42 dollars, or 7.5%, to 30.02 dollars.

SanDisk’s remarks came on a day of light trading and dented but did not sink an upbeat mood on Wall Street.

“Even though you’re up only 0.1%, it’s very good news that the declining trend may have been reversed,” Mr Johnson said, referring to the leading indicators report.

“That is important for this reason: it’s consistent with the message of the markets.”

The broader market, as measured by the Standard & Poor’s 500 index, rose 2.67% last week on cautious optimism about the economy.

The Dow rose 41.36, or 0.32%, to 13,028.16. The blue chips had been up nearly 150 points earlier in the session.

Broader stock indicators were mixed. The S&P 500 advanced 1.28, or 0.09%, to 1,426.63, and the Nasdaq composite index fell 12.76, or 0.50%, to 2,516.09.

Government bond prices turned higher as the rally in stocks cooled. The yield on the benchmark 10-year Treasury note, which moves opposite its yield, fell to 3.84% from 3.85% late Friday.

The dollar rose against most other major currencies, while gold prices also climbed.

One pressure point for the economy – rising energy prices – appeared relatively in check.

While many investors remain mindful of the rising price of oil and its effect on consumer spending, Wall Street seemed somewhat unfazed as oil advanced but did not top its record trading high set on Friday.

Light, sweet crude rose 76 cents to settle at a record 127.05 dollars per barrel on the New York Mercantile Exchange.

Financial shares also pulled back after the market came off its highs. Merrill Lynch fell 1.14 dollars, or 2.3%, to 47.71 dollars, while Lehman Brothers Holdings fell 85 cents to 42.79 dollars.

In other corporate news, Microsoft has renewed talks with Yahoo about a possible deal to bolster the companies’ position in the online search and advertising markets.

The software maker did not say if the discussions included a takeover of Yahoo. Yahoo said its directors “remain open to pursuing any transaction which is in the best interest of our stockholders”.

Microsoft fell 53 cents to 29.46 dollars, and Yahoo rose two cents to 27.68 dollars.

General Motors rose after one of its biggest suppliers reached a tentative labour deal with the United Auto Workers.

The agreement with American Axle & Manufacturing Holdings may end a nearly three-month strike by 3,650 US hourly workers. GM advanced 19 cents to 20.87 dollars.

Lowe’s posted a first-quarter profit decline and issued an outlook for the year that came in below analyst estimates. The second-largest home improvement chain fell 64 cents, or 2.6%, to 24.25 dollars.

The Russell 2000 index of smaller companies fell 2.72, or 0.37%, to 738.45.

Declining issues narrowly outpaced advancers on the New York Stock Exchange, where volume came to 1.15 billion shares compared with 1.31 billion traded on Friday.