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Pessimistic investors knock down stocks

Rising oil prices, disappointing forecasts from the technology sector and pessimism over the economy pushed stock prices lower Tuesday, with technology stocks bearing the brunt of the day's sell-off.
/ Source: The Associated Press

Rising oil prices and disappointing forecasts for the technology sector sent stocks skidding Tuesday, with pessimism over the economy further fueling the selloff. The tech-heavy Nasdaq composite index fell more than 2 percent, its biggest loss since mid-March.

A negative analyst report for tech bellwether Intel Corp. and a disappointing outlook from chip maker Conexant Systems Inc. triggered selling throughout the technology sector. Oil prices rose $1.26 to $39.65 a barrel on the New York Mercantile Exchange, adding to worries over inflation and the economy.

“My feeling is that people are really searching for some kind of a thesis for the second half, trying to figure out what will move stock prices, and we’re not coming to any conclusions on that,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “The feeling is that we’re one major piece of negative news away from more significant selling.”

Investors were still nervous after Friday’s lower-than-expected job creation figures, which led to concerns that the fast pace of economic growth was slowing. And with little economic data due this week — and the bulk of second-quarter earnings still at least a week away — the uncertainty quickly translated into pessimism.

The Dow Jones industrial average fell 63.49, or 0.6 percent, to 10,219.34.

Broader stock indicators fell sharply. The Nasdaq dropped 43.23, or 2.2 percent, to 1,963.43, its biggest one-day drop since March 15. The Standard & Poor’s 500 index was down 9.17, or 0.8 percent, at 1,116.21.

Wall Street was also concerned about Democratic presidential candidate John Kerry’s selection of John Edwards as his running mate. Edwards, a trial lawyer, is seen by the conservative investment community as a proponent of the expensive class-action litigation that often plagues corporate America.

“Clearly, Edwards isn’t the choice of business. But the primary question is John Kerry the choice for business?” Pears said. “The answer to that question is less clear for John Kerry, and he’s the one running for president, not Edwards.”

Dow component Intel dropped 22 cents to $26.11 after Lehman Brothers reduced its earnings forecast for the chip manufacturer due to lower back-to-school demand for personal computers.

Conexant, a small, wireless chip maker, said its third-quarter sales and earnings would fall below expectations due to weak sales. Conexant slid $1.77, or 43 percent, to $2.31.

“The thing with semiconductors is just going to repeat itself throughout the market,” said Bill Groenveld, head trader for vFinance Investments. “If somebody has more seller interest on a given piece of news, they’re going to pull out the negatives. If there’s more buyer interest, you’ll see the silver lining. Right now, there’s just no volume and very little buyer interest.”

Aircraft manufacturer Boeing Co. was upgraded from “underperform” to “market perform” by Wachovia Securities because of steady business growth. Boeing nonetheless fell 21 cents to $49.31.

Acuity Brands Inc. reported an 18 percent rise in third-quarter earnings Tuesday and reiterated the company’s full-year outlook, but the lighting and specialty products company missed expectations by 2 cents per share. Acuity fell 52 cents to $25.45.

Veritas Software Corp. plunged $9.55, or 36 percent, to $17.00 after it lowered its second-quarter earnings and revenue outlook, citing weakness in corporate software sales.

Drug store chain Rite Aid Corp. said its same-store sales rose 2.4 percent, following a strong trend in the pharmacy sector. Rite Aid slipped 17 cents to $4.91.

Declining issues outnumbered advancers by more than 3 to 2 on the New York Stock Exchange, where preliminary consolidated volume came to 1.57 billion shares, compared to 1.32 billion on Friday.

The Russell 2000 index of smaller companies was down 10.31, or 1.8 percent, at 572.41.

Overseas, Japan’s Nikkei stock average fell 0.6 percent. In Europe, Britain’s FTSE 100 closed down 0.7 percent, France’s CAC-40 dropped 0.8 percent for the session, and Germany’s DAX index lost 1.3 percent.