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Tech stocks get no relief

The major indexes and technology stocks continue their sinking motion throughout the trading day. Dwindling corporate profits and economic data weigh heavily on investors.

Technology stocks sank further by market close Thursday after drooping throughout the trading day, as dwindling corporate profits and economic data weighed on the sector.

The Nasdaq slumped 77.59 to 2,044.07 , while the Dow Jones Industrial Average was off 181.49 to 10,690.13. The broader markets were hurt on concerns that the European Commission will derail General Electric's acquisition of Honeywell.

"Traders think things look bleak; the only thing that lifts the market now is when sellers go to the bathroom," Bear Stearns research said in a market update from traders Thursday.

On the economic front, U.S. business inventories held steady in April as sales dipped for a second straight month, the Commerce Department said in a report released Thursday.

While sales fell 0.5 percent in April to $833.8 billion, inventory levels remained at $1.19 trillion. That was in line with economists' expectations.

U.S. inflation at the wholesale level was tame in May, offering reassuring news for Federal Reserve policy makers who will meet later this month to consider cutting interest rates. The Labor Department reported that the Producer Price Index, which measures prices paid to businesses for ready-to-sell goods such as clothing and gasoline, inched up 0.1 percent last month after a 0.3 percent rise in April.

"Perhaps stocks have figured out that although today's data clears the way for the Fed to ease 25 basis points or more, that this is a small consolation against the stock-specific problems we are weathering today," said Bear Stearns' report.

In Washington, D.C., a congressional committee examined allegations of bias and inflated analyst recommendations. In written testimony, Securities Industry Association President Marc Lackritz said there was a big difference between analysts making a wrong projection and being influenced by their firms' business. Earlier this week, the SIA issued a set of "best practices" for Wall Street firms in an effort to assuage concerns.

In the tech sector, the focus was clearly on dwindling profits. Among the CNET tech indexes, semiconductors and semiconductor equipment, server hardware, storage, and telecom equipment each fell 3 percent or more.

Corning shares fell $1.35 to $16.00 after a Merrill Lynch analyst predicted a "nuclear winter" for the company's fiber optic business.

Shares of Micromuse plunged $11.19 to $24.06 after CIBC World Markets and Deutsche Banc Alex Brown downgraded the company. Executives for the maker of network management software said Wednesday that business conditions were "difficult," although they did not give any new financial guidance. Micromuse is expected to earn a profit of 21 cents per share in the current quarter, according to First Call.

Xerox said Thursday that it would exit the small-office and home-office business, explaining that this should save the company $100 million. It will, however, take a charge of up to $200 million for the move. Xerox will discontinue its line of personal inkjet and xerographic products sold primarily through retail channels over the next six months. Shares fell 21 cents to $8.20.

STMicroelectronics lowered revenue estimates for the second quarter to a range of $1.55 billion to $1.60 billion, down from $1.65 billion to $1.80 billion. The company said gross margins have been hurt by a difficult pricing environment and weakness in telecom equipment and computer peripheral sales. Shares fell 90 cents to $33.20.

Ingram Micro shares fell $1.00 to $13.06. The company reduced its second-quarter sales forecast and said it will break even or have an operating loss due to slowing demand abroad.

Among leading volume movers, Cisco Systems fell $1.24 to $17.78, Intel was down $1.45 to $27.61, Lucent Technologies dropped 49 cents to $6.75, and Oracle lost 65 cents to $14.85.

CNET Investor staff and Reuters contributed to this report.