updated 3/10/2004 9:07:48 AM ET 2004-03-10T14:07:48

Fears over a lack of job growth and a sluggish economy sent stocks sharply lower Thursday, with the Nasdaq composite index wiping out its gains for all of 2004 and the Dow Jones industrial average nearly following suit.

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With the first quarter ending this month, companies such as Nike Inc. and Texas Instruments Inc. have issued surprisingly strong earnings outlooks. But with job creation stagnant and some analysts believing stocks are overpriced, investors feared that the market’s year-long rally might have ended.

“When good news doesn’t move the market higher, we’re obviously in a corrective phase,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds. “The glass is half-empty right now, but I do believe that will switch back to half-full again when earnings go out in April.”

The Nasdaq composite fell 13.62 points, or 0.7 percent, to 1,995.16, after falling 38.85 points on Monday. The Nasdaq, home to many of the technology stocks that fueled last year’s rally, closed below its low for the year of 2,003.37 and saw its lowest close since Dec. 26.

The Dow fell 72.52 points, or 0.7 percent, to 10,456.96, adding to Monday’s loss of 66.07 points. The Dow was off 280.74 points from its 2004 high, set on Feb. 11, and fell below its 2003 closing level of 10,453.92 in afternoon trading before a slight session-ending rally. It was the Dow’s lowest close since Jan. 13.

The Standard & Poor’s 500-stock index fell 6.62 points, or 0.6 percent, to 1,140.58, having fallen 9.66 points on Monday.

After peaking three weeks ago, stocks have fallen amid investors’ growing discomfort with the economy and a sense that businesses aren’t creating enough jobs to give the recovery much momentum going forward. Last Friday’s disappointing jobs report from the government only added to Wall Street’s frustration.

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But many analysts weren’t surprised by the market’s recent downturn, believing stocks were due for a correction after their runup over the past year.

Hugh Johnson, chief investment officer at First Albany Corp., said investors’ moves — getting out of the once high-flying technology sector and into healthcare and consumer staples — are similar to those that occurred when the bear market began.

“Normally, in the second year of a bull market things slow down, but this is more than that,” Johnson said. “This is not going to turn out to be a barn-burner of a year as was widely expected. I’m in the bullish camp, but I must admit, my bullishness is really being tested.”

Texas Instruments said its quarterly profits would come in at the high end of previous forecasts. Shares fell 34 cents to $30.26.

Athletic wear maker Nike jumped $2.17 to $76.66 after stating it would easily beat Wall Street estimates for the current quarter.

There was also another merger in the financial sector. Sovereign Bancorp lost 29 cents to $21.75 after it announced it would acquire Waypoint Financial Corp. for $980 million. Waypoint gained $2.72 to $27.48.

Grocery store chains Albertson’s Inc. and Kroger Co. reported faltering earnings due to the 4 1/2-month grocery store worker strike in California, which ended last month. Albertson’s, down 21 cents at $23.91, saw profits fall 40 percent for the quarter, while Kroger lost $337.4 million for the quarter and fell 35 cents to $18.56.

Sun Microsystems shed 33 cents to $4.33 after it was downgraded to a “neutral” rating by Banc of America Securities due to concerns over the long-term stability of the company’s Unix business. The struggling computer and software maker had its debt rating cut to junk status Friday.

Declining issues outnumbered advancers by a 9-to-5 ratio on the New York Stock Exchange, where volume came to 1.48 billion shares, compared to 1.26 billion on Monday.

The Russell 2000 index of smaller companies fell 6.56 points, or 1.1 percent, to 585.95.

Overseas, Japan’s Nikkei average gained 0.3 percent. In Europe, Britain’s FTSE 100 fell 0.3 percent for the session, France’s CAC-40 closed down 1.2 percent and Germany’s DAX index lost 1.4 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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