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Dow takes 227-point nosedive

Earnings warnings, June jobless rate worry investors

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NEW YORK — Wall Street's pessimism about earnings deepened Friday, sending the Dow Jones industrials down more than 220 points following more bad news from technology bellwethers EMC and Advanced Micro Devices.

The latest earnings warnings, combined with news of an increase in the June unemployment rate, exacerbated fears that second-quarter results might be even worse than expected — and that a business turnaround will not happen before 2002.

"A lot of people had bought the idea that the worst was behind us. Obviously that's not the case," said Richard Dickson, a technical analyst at Hilliard Lyons. "The earnings warnings, particularly in tech, are continuing, and that's spreading to the rest of the market."

The Dow fell 227.18 to 10,252.68, for a loss of 2.2 percent, extending its drop of the previous two sessions.

Broader stock measures also tumbled. The NASDAQ composite index closed down 75.95, or 3.7 percent, at 2,004.16, its fourth consecutive daily drop. The Standard & Poor's 500 index lost 28.65, or 2.4 percent, to 1,190.59, its third straight such decline.

The losses made for a disappointing week for all three indicators. The Dow ended the week down 2.4 percent — its seventh straight weekly decline — while the S&P dropped 2.8 percent. The NASDAQ suffered the biggest decline, sliding 7.2 percent for the week.

Trading volume was light throughout the week because of the Independence Day holiday Wednesday. Still, analysts said the drop reflects a general uneasiness about where the market is headed.

"The question is still when is the economy going to turn," said Todd Clark, co-head of trading at WR Hambrecht. "With the EMC and Advanced Micro Devices misses being so big and really blindsiding the Street, it's caused people to say, 'I'm pulling bids and I'm not going to be buying right now.' "

EMC tumbled $8.43 to $21.60, a 28 percent loss, after the data storage company said a slowdown in tech spending will put its second-quarter earnings far below Wall Street expectations.

A similar earnings prediction from AMD sent the chip maker down 27 percent, falling $7.84 to $20.80.

The degree of the reductions made investors think twice about other technology issues, including IBM, which fell $5.60 to $106.50, and Intel, which dropped $1.41 to $28.43.

Non-technology stocks weren't immune from investors' frustration. America West Holdings, the parent company for America West Airlines, fell 34 cents to $9.32 on news it expects the carrier to post a second-quarter net loss because of the weak U.S. economy and high fuel prices.

But retailer Federated Department Stores managed a small gain, rising 23 cents to $38.24, despite Thursday's profit warning blamed on weak sales.

The reduced forecasts are the latest in a string of warnings that began weeks ago in advance of second-quarter reports due out this month.

Although Wall Street has been expecting weak results, the extent of the warnings, combined with most companies' inability to predict when those figures will improve, has fouled investors' mood. The fact that warnings have come from an array of sectors, rather than just technology as expected, has also upset the market.

As a result, instead of buying stocks on expectations of a future turnaround, investors have been cautiously buying during the market's dips and selling as soon as stocks showed any strength. The losses have also eroded the market's huge rally this spring, although the major indexes remain well above their lows for the year.

Declining issues led advancers 2 to 1 on the New York Stock Exchange. Consolidated volume was 1.24 billion shares, compared with nearly 1.0 billion Thursday.

The Russell 2000 index fell 9.47, or 1.9 percent, to 483.26.

Overseas markets were also weak. Japan's Nikkei stock average fell 2.4 percent. In Europe, Germany's DAX index dropped 2.3 percent, Britain's FT-SE 100 lost 1.3 percent, and France's CAC-40 slipped 2.4 percent.