NEW YORK — With new reminders that business will remain difficult for quite a while, investors took profits on Wall Street Monday, locking in gains following the market’s two-week rally.
Among the big decliners were companies that released disappointing earnings and acknowledged that the future will be challenging, and those that were downgraded by brokerages. However, analysts had expected a pullback after the Dow industrials and Nasdaq composite index ended last week with triple-digit advances.
The Dow industrial average was down 87.44 at 10,492.41 in midday trading.
The market’s broader indicators also fell. The Nasdaq composite index was down 100.37 at 2,063.04, while the Standard & Poor’s 500 slipped 20.79 to 1,222.19.
Companies with negative earnings reports traded lower on Monday.
T. Rowe Price fell $1.48 to $34.87 after the investment firm said its first-quarter profit dropped 34.5 percent over last year.
Network equipment maker Sun Microsystems tumbled $2.31 to $17.40 on disappointing growth of 2.2 percent for its fiscal third quarter. The company also said demand continues to wane and that it doesn’t see business improving in the near term.
Analysts’ downgrades also weighed on the tech sector.
Software maker Oracle fell $2.19 to $17.56 after Lehman Brother reduced its rating on the stock and warned of a weak fourth quarter for the company.
Semiconductor stocks fell after Merrill Lynch downgraded many companies, including PMC-Sierra and Intel. PMC-Sierra plunged $4.81 to $40. Intel, which rose sharply last week on better-than-anticipated earnings and an announcement that sales have stabilized, dropped $1.93 to $30.50.
According to a research letter by Merrill Lynch analyst Joseph Osha, the semiconductor sector is overvalued, rising 36 percent in the past two weeks. The letter also states: “We would also add that there is no identifiable evidence that the semiconductor recovery is closer at hand.”
Noting the recent big advance in the tech sector, analysts weren’t surprised that stocks fell.
“The tech stocks have moved ahead quite significantly, but let’s face it, people have been hurt so badly and lost so much money by the decline that there is a natural tendency to take profits,” said Jack Shaughnessy, chief investment strategist for Advest Inc. in Hartford, Conn.
While investors are growing more confident, Shaughnessy said they are still worried about how long it will take for weak earnings and the sluggish economy to benefit from the four interest rate cuts so far this year by the Federal Reserve. Investors, while hoping business will improve by the end of the year, are fearful that it will take much longer.
Investors on Monday rewarded companies that beat lowered earnings expectations.
Exxon Mobil advanced $1.57 to $86.74 after announcing that high prices for oil and natural gas boosted earnings, which were 9 cents a share above expectations.
Pepsico rose $1.09 to $42.35 on news it earned 34 cents a share, and that it is comfortable it will meet yearend sales and growth targets.
Declining issues outnumbered advancers more than 4 to 3 on the New York Stock Exchange where volume was 429.22 million shares, down from 648.56 million at the same point Friday.
The Russell 2000 index, which measures the performance of smaller companies stocks, was down 5.28 at 461.43.
Stocks also fell overseas Monday. Japan’s Nikkei stock average finished the day down 0.4 percent.
In afternoon trading in Europe, Germany’s DAX index was down 1.3 percent, Britain’s FT-SE 100 fell 0.5 percent, and France’s CAC-40 declined 0.9 percent.
