NEW YORK, July 21, 2006 (AFP) – US shares swung lower Friday as investors remained cautious about Middle East violence and technology shares were pressured by a warning of lower earnings from computer giant Dell.
The Dow Jones Industrial Average dropped 36.50 points (0.33 percent) to 10,891.60 while the tech-heavy Nasdaq fell 11.91 points (0.58 percent) 2,027.51 at 1555 GMT.
The broad-market Standard and Poor’s 500 drifted down 4.08 points (0.33 percent) to 1,245.05.
The market was still mulling a strong rally on Wednesday inspired by comments from Federal Reserve chairman Ben Bernanke to Congress that were interpreted as suggesting the central bank will not raise interest rates so high as to choke off economic growth.
But Fred Dickson, market strategist at DA Davidson, said the persistent concerns about the Middle East and slowing economic growth may hurt the market ahead of the weekend.
"With the (Bernanke) testimony over, world events and earnings are taking command of the markets again," Dickson said.
"This morning, bombing between Israel and southern Lebanon intensified and concerns that Israeli ground troops could move this weekend grew. The earnings warning from Dell … concerns that the technology market may not return to growth as soon as was expected."
Dickson added, "We also suspect some traders will be reluctant to go into the weekend long (on) stocks particularly if the news out of the Mideast increases the war concerns."
Dick Green at Briefing.com said the earnings reports "on balance remain solidly better than expected, and guidance overall hasn’t been that bad."
But he said Wall Street is coming to grips with cooler economic growth that will lead to weaker profits.
"There is no doubt that earnings growth has to slow for many companies in the months ahead," he said.
"Economic growth is slowing and so will earnings. Yet, it takes a lot of good earnings now to offset one warning about future profits. In this environment, it will be hard for the market to generate a sustained rally."
Additionally, he said that there are "legitimate concerns about the war in the Middle East, oil prices, and whether the Fed will be able to successfully achieve a soft landing for the economy (which) give the bears plenty to worry about."
Among stocks in focus, Dell slid 2.88 or 13 percent to 19.22 dollars after its earnings warning shocked investors.
Some of that weakness spilled over to the chip sector, as Advanced Micro Devices (AMD) fell 2.61 or 12 percent to 19.04 dollars. AMD earlier this week reported a 62 percent drop in quarterly profits.
Microsoft rose 1.05 or 4.6 percent to 23.90 after the software giant reported profits that fell 24 percent from a year ago but topped Wall Street expectations.
Google meanwhile rallied 3.11 or 0.8 percent to 390.23 as the market digested news that the Internet search giant had doubled its quarterly earnings on strong revenue growth..
Away from the tech sector, Caterpillar fell 23 cents to 68.85 even after the heavy equipment giant reported record results for the latest quarter.
Bonds were little changed. The yield on the 10-year US Treasury bond held steady from Thursday at 5.028 percent and that on the 30-year bond rose to 5.088 percent from 5.082 percent. Bond yields and prices move in opposite directions.