NEW YORK — Technology stocks tumbled Friday on a profit warning from Microsoft, the latest sign that an economic turnaround remains a ways off. But investors were selective in their punishment, leaving the broader market basically intact.
Hopes that earnings and the economy would improve by year-end have dimmed in recent weeks as more than 800 companies have warned of shrinking profits and many others have said that business is so uncertain that they can't make accurate projections.
The Dow Jones industrial average ended down 33.35 at 10,576.65. Microsoft, which blamed its pessimistic outlook on slumping PC sales, led the way, dropping $3.39 to $69.18.
The market's broader indicators were also lower. The tech-laden NASDAQ composite index fell 17.22 to 2,029.37, and the Standard & Poor's 500 index, Wall Street's widest measure, slipped 4.17 to 1,210.85.
While past earnings are important, analysts say investors are more concerned with what companies, especially industry bellwethers like Microsoft, have to say about the future — one reason why the market this week pulled back from recent advances.
Given a bevy of disappointing news from the tech sector and the Microsoft warning, analysts were encouraged that the market didn't fall harder. In fact, the market's three major indicators were little changed for the week — the NASDAQ down 2.6 percent, the S&P 500 off 0.4 percent and the Dow up 0.4 percent — as they alternated winning and losing sessions throughout the week.
"The best that can be said is that we are seeing an attempt at a bottoming. A few months ago this would have been a real problem for the market," said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara, Calif., noting that the NASDAQ was able to stay above the crucial 2,000 level.
Another sign of relative strength was that more stocks posted gains than losses Friday on the New York Stock Exchange where advancing issues narrowly outnumbered decliners 16 to 15.
But analysts also said the market also has been frustrated by mixed signals from companies including Microsoft, which said last week that its fiscal fourth-quarter revenues would be better than expected. Microsoft's report was in line with that forecast, but the software giant then issued a profit and revenue warning for its fiscal first quarter.
"It is almost a turnabout in a week's time. I don't believe anything I hear," lamented Gary Kaltbaum, market technician for Investors' Edge Partners.
Other tech losses included computer maker Gateway, which slid $3.60, or nearly 25 percent, to $10.99 after drastically lowering its estimates for the second half of 2001. Gateway said it anticipates breaking even, while Wall Street was expecting earnings of 11 cents a share in the third quarter and 21 cents a share in the fourth.
Computer stocks were also hurting from a report Friday that the nation's slumping PC industry has led to the first decline in worldwide PC sales. Preliminary second-quarter results indicated that worldwide PC shipments totaled 30.4 million units, a decline of 1.9 percent from the second quarter of 2000, according to market researcher Gartner Dataquest.
Dell Computer fell 49 cents to $27.89 despite saying Thursday that demand is improving and that it is standing by its second-quarter earnings estimates of 16 cents a share.
While PMC-Sierra said it expects business to improve in the second half of 2001, it fell $4.07 to $27.24 after Bear Stearns downgraded the stock. The brokerage cited excessive inventories and slumping demand.
There were some gainers, which included companies that beat earnings estimates or predicted business will improve in the near term. EBay, which did both those things late Thursday, climbed $2.40 to $66.80.
Sun Microsystems, which surpassed earnings expectations by a penny a share, rose 59 cents to $15.03.
Earnings aside, the broader market was mixed. Citigroup rose 41 cents to $50.56, while Coca Cola fell 59 cents to $46.11. General Motors advanced 89 cents to $65, while Home Depot slipped 40 cents to $49.40.
Consolidated volume came to 1.36 billion shares, below the 1.56 billion that were traded on Thursday.
The Russell 2000 index, which measures the performance of smaller company stocks, inched up 0.39 to 487.93.
Overseas markets were lower Friday with France's CAC-40 ending the day down 1.0 percent, Britain's FT-SE 100 declining 0.9 percent and Germany's DAX index losing 1.1 percent. Japanese financial markets were closed Friday for a national holiday but will reopen Monday.