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Dow ends in correction zone, Nasdaq also slides

NEW YORK: U.S. stocks fell sharply on Friday with a sell-off in shares of the world's biggest software company, Microsoft, dragging heavily on a market already frayed by worries about an economic slowdown.

The broad losses put the brakes on a run-up in high-flying stocks, such as computer networkers, chipmakers and biotechnology, and struck deep into traditional stocks, like automakers, chemical and paper companies.

The Dow Jones industrial average fell 218.42 points, or 2.05 percent, to end at 10,425.21.

The 30-stock average, one of the most widely watched in the world, is now in a "correction zone" as defined by Wall Street analysts, down 11.07 percent from its Jan. 14 closing high of 11,722.98.

The Nasdaq Composite Index, heavily weighted with technology stocks, fell 90.18 points, or 2.01 percent, to 4,395.45, a day after it scored a new high of 4,485.63.

The Standard & Poor's 500 Index slipped 29.71 points, or 2.10 percent, to 1,387.12.

"We've seen this dichotomy between technology stocks and the rest of the market, where the rest of the market is clearly sending a different message," said Ned Riley, stock market strategist for State Street Global Advisors of Boston.

"The message is that they are starting to discount an economic environment that is not as robust as we have had," he said.

Microsoft Corp., a Dow component and one of the largest stocks in both the Nasdaq Composite Index and the Standard & Poor's 500 index, fell 6-1/16 to 99-15/16 in heavy trading.

A study by technology consulting firm Gartner Group questioned whether the latest version of Microsoft's flagship operating system, Windows 2000, could interact smoothly with other software. The concerns were exacerbated by comments made by Michael Dell, chairman and chief executive of Dell Computer Corp. that dimmed expectations for the new system.

Leading computer makers fell, with Dow components Hewlett-Packard Co. off 4-5/8 at 121-1/4 and International Business Machines Corp. closing down 3-13/16 at 115-5/16 on the New York Stock Exchange.

For the week, the Dow dropped 538 points while the Nasdaq rose 151 points.

Both indices managed to close off their session lows on Friday, which technical analysts see as a positive sign.

There were 1,970 declining stocks, compared with 1061 advancers, on volume of 1.02 billion shares on the New York Stock Exchange.

"You are seeing some very normal profit-taking in the high techs," said Alfred Goldman, technical analyst at A.G. Edwards and Sons in St. Louis.

"The question is whether it is going to last a couple of days or a couple of weeks. Retail sales were very positive for the market. That is why bonds are up," he said.

The U.S. Commerce Department said January retail sales rose 0.3 percent to a seasonally adjusted $262.21 billion, a smaller gain than forecast by Wall Street economists. The data got a big lift from sales at new-car showrooms. Excluding that data, sales actually fell 0.3 percent.

The 30-year U.S. Treasury bond was up 26/32, which drove the yield down to 6.27 percent from Thursday's close of 6.44 percent.

Rate-sensitive stocks shed their gains from early in the session. American Express Co. fell 1 to 153-1/2 while J.P. Morgan & Co. slipped 1-3/8 to 112-5/8.

The drug sector, which has seen heavy selling this week, lost more ground. Merck & Co. Inc. lost 3-3/16 to 65-3/16 and Pfizer PFE.N slid 1-3/16 to 34-3/16 in heavy trading.

Oil stocks dropped as economists continued to worry about the potentially inflationary impact of soaring oil prices on world economies.

U.S. Energy Secretary Bill Richardson criticised Saudi Arabia's decision to cut deliveries of oil to the United States by 25 percent in March. Exxon Mobil fell 2 to 73-7/8 and BP Amoco Plc dropped 1-5/16 to 46-5/8.-Reuters