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Nasdaq falls, Dow climbs ahead of Microsoft ruling

The Dow and the Nasdaq move in opposite directions before a federal judge issues a stinging rebuke of the software giant, saying it violated antitrust laws.

The Dow Jones industrial average and the Nasdaq composite index moved in opposite directions before a federal judge issued a stinging rebuke of Microsoft, saying the software giant violated antitrust laws.

"It's easy to point a finger at the Microsoft ruling, but I think the decline goes further than that," said Bill Meehan, chief market analyst at Cantor Fitzgerald. Meehan said he believes portfolio managers of nonaggressive growth funds are shifting from technology stocks and rebalancing their portfolios. "Microsoft is a trigger for a further decline," he added.

The Nasdaq lost 349.15, or 7.6 percent, to close at 4,223.68, led by heavy trading in Microsoft. The decline was the worst point drop in Nasdaq history and fifth worst in pecentage terms.

The Standard & Poor's 500 index gained 7.39 to 1,505.97, while the Dow jumped nearly 3 percent, climbing 300.01 to 11,221.93. Financial stocks J.P. Morgan, Citigroup and American Express posted strong gains

The Microsoft drop hit the CNET tech index, which slid 146.33, or 4 percent, to 3,205.16.

Losers edged out winners, with 81 of the 98 stocks in the index falling and 17 rising.

Of the 18 sectors tracked, computer-aided design or manufacturing and PC software companies posted the sharpest drops, falling about 15 percent and 13 percent, respectively. Communication services firms were the day's largest gainers, climbing a slim 1 percent.

News of the impending ruling in the Microsoft antitrust case caused shares of the company to fall $15.38, or 14 percent, to $90.88 by the 1 p.m. PST close of regular trading. Volume reached nearly 130 million shares--more than four times the stock's daily average--making it the most active stock on the Nasdaq.

Intel closed down $1.31 at $130.63.

Legato Systems was the biggest percentage loser on the Nasdaq. The maker of database software fell $24.75, or 55 percent, to $19.88 on a volume of 33.3 million shares, nearly seven times its daily average. Legato said it must restate fourth-quarter earnings and post losses after its sales force made unauthorized transactions.

Among members of the CNET tech index, Parametric Technology and LSI Logic posted significant losses.

Parametric fell $10.41, or nearly 49 percent, to $10.75. The company issued an earnings warning to investors for its second quarter.

LSI dropped $7.69, or 10 percent, to $65.06 on a volume of 8.2 million shares, more than twice its daily average. An analyst at Gilmour & Associates started coverage of the stock with a "sell" rating.

Yahoo and eBay also fell. The companies said after markets closed Friday that their merger talks have ended. Yahoo dropped $11.25 to $160.13, while eBay fell $32.75, or 18 percent, to $143.25.

VeriSign and Akamai Technologies also posted large losses. VeriSign fell 32.88, or 22 percent, to $116.63; Akamai dropped $41.81, or 26 percent, to $119 on a volume of 1.2 million shares--more than twice its daily average.

Wireless and phone companies were among the few survivors today, as merger deals continued to move forward. AT&T rose $1.69 to $58 after the company said that its wireless division will post strong revenues for the first quarter.

GTE and Bell Atlantic managed to tread water. GTE rose $2.44 to $73.44, and Bell rose $1.94 to $63.06. The pair revealed the name of the company they will form after they merge: "Verizon".

SBC Communications rose $2.63 to $44.75. The company said it will give regulators new information concerning its bid to enter Texas' long-distance phone market.

The Philadelphia semiconductor index fell 87.08, or 7 percent, to 1,094.81, led by chip equipment maker Novellus, which lost $10.50, or 18 percent, to close at $45.63. Advanced Micro Devices was the only gainer on the index. Its shares climbed $1.63 to $60.63 after the company unveiled a $300 million sales deal.

Shares of IBM rose $3.38 to $121.75 after the company said it has developed a process to make microchips up to 30 percent faster.