Stocks Fall; Dow in Red for August

Stocks closed out the month on a sour note Friday, with the Dow Jones industrials failing to hold a triple-digit gain as investors grappled with conflicting economic reports and downbeat news from the technology and telecom sectors.

The day’s loss left the Dow in the red for August--the widely watched index’s fifth-straight monthly loss and its longest such losing streak since the summer of 1981.

The market, particularly blue chips, got an early boost from data showing expansion in manufacturing. But a report showing continued weakness in consumer sentiment, a gloomy outlook from tech bellwether Sun Microsystems--released after the market closed Thursday--and a fresh profit warning from BellSouth gave investors reason to cash out recent gains.

“There’s a growing sense that technology is going to take even longer to turn on the earnings front, so investors are shipping money out of that group,” said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Banking.

The blue-chip Dow Jones industrial average ended with a loss of 7.49 points, or 0.1%, at 8,663.50. Early on, the Dow was up more than 112 points, bolstered by industrials such as 3M, which closed up 30 cents at $124.95.

The Standard & Poor’s 500 index sagged 1.73 points, or 0.2%, to 916.07, while the tech-focused Nasdaq composite index fell 20.92 points, or 1.6%, to 1,314.85 to finish near its low of the day.

The overall market was mixed. Winners led losers by about 9 to 7 on the New York Stock Exchange, while losers held a 9 to 8 edge on Nasdaq.

For the week, the Dow fell 2.4% and the S&P; 500 fell 2.6%, both ending five straight weeks of gains. Nasdaq fell 4.8%. For August, the Dow fell 0.8%, the S&P; 500 rose 0.5% and Nasdaq fell 1%.

Volume on the last trading day of the month was among the lightest of the year ahead of the long Labor Day weekend, with many investors already on vacation and others heading out early. U.S. markets will be closed Monday for the holiday.

Sun was down 14 cents at $3.69 and was the most actively traded issue on Nasdaq. Late Thursday, the computer manufacturer lowered its revenue outlook for the September quarter and said corporate spending on technology may be weakening.

Other computer-related tech shares felt a pinch from the Sun news. Web gear maker Cisco Systems fell 38 cents to $13.82 and top chip maker Intel fell 47 cents to $16.67. Among software companies, Microsoft was off $1.50 at $49.08 and Oracle fell 37 cents to $9.59.

“Tech’s just not in good shape right now,” said Mark Donahoe, managing director of institutional sales trading at U.S. Bancorp Piper Jaffray. “You still have somewhat of a slowdown.”

Meanwhile, BellSouth, the No. 3 local telephone company, said 2002 earnings will fall below expectations due to a restructuring, weak sales in its wireless business and the turbulent economy. BellSouth lost 93 cents to $23.32. Dow member SBC Communications, BellSouth’s partner in the wireless joint venture Cingular Wireless, dropped $1.06 to $24.74.

In other trading, bond yields were mixed, with the yield on the benchmark 10-year Treasury note dipped to 4.13% from 4.14% on Thursday. Oil prices ticked up, while the dollar lost ground against the Japanese yen and gained against the euro.

Among Friday’s other highlights:

* Semiconductor equipment stocks were buffeted by a slew of downgrades by Merrill Lynch, which cut its midterm ratings on KLA-Tencor and Applied Materials, citing Sun’s dim forecast. It also cut its rating on Novellus Systems. Reactions were mixed. KLA-Tencor slipped 75 cents to $32.87, Applied Materials fell 8 cents to $13.36 and Novellus rose 17 cents to $24.46.

* Rawlings Sporting Goods, whose gloves and bats are used by many major league baseball players, rose 32 cents, or 6%, to $5.37. The increase came after the players union reached a labor agreement with team owners in 11th-hour talks, averting a strike just ahead of the deadline.

* Genelabs Technologies rose $1.43, or 103%, to $2.82. The drug developer said it received conditional U.S. regulatory approval for a new drug to treat the degenerative disorder lupus but would need to conduct an additional clinical trial to gain clearance.

Market Roundup, C4-5