The Nasdaq composite index closed up 1.93 at 2,770.42, and the Standard & Poor's 500 index dipped 5.42 to 1,342.55. The Dow Jones industrial average fell 90.69 to 10,587.59, led by Home Depot, which lost $3.25, or 7 percent, to $41.
Sun COO: "The PC era is over"
Ed Zander, COO, Sun Microsystems
"I would argue that the tech sector is doing well; it's still trending above the whole market," said Peter Coolidge, senior equity trader at New York-based investment bank Brean Murray. "There's enough reason for profit-taking to cut in, but we're not seeing it."
The Nasdaq gained 5 percent from last week's close, while the S&P 500 rose nearly 2 percent, and the Dow stayed almost unchanged.
The Nasdaq is also up 12 percent so far this year, while the S&P 500 has advanced about 2 percent, and the Dow has fallen almost 2 percent.
Sun met Wall Street earnings expectations of 16 cents for its fiscal second quarter as surveyed by First Call, but told analysts that it expects a revenue slowdown in the second half of calendar year 2001. Sun expects sales growth in the second half of 30 percent to 35 percent, compared with previous expectations of growth in the mid-30s.
Shares of Sun fell $4, or 11 percent, to $30.88 on a volume of more than 129 million shares, more than six times the stock's average daily volume of about 20.4 million shares.
Coolidge said the fact that gloomy news from Sun did not drag down the markets was a sign of strength.
"Most of the negative news was already priced into tech stocks," he said. "Valuations are at a level where people feel comfortable coming into these stocks."
Many Wall Street analysts believe that earnings season should be relatively calm compared with the slide the markets took at the end of the year.
"Most expectations have been cut, so those (lowered) expectations will most likely be met," said Richard Peterson, a market strategist at Thomson Financial Securities Data.
But perhaps the true sign of a healthy market will be the strength of the IPO market, and Peterson says that the markets will not see any deals for another month or so.
Most of the 18 sectors tracked by CNET Investor posted gains, but the Sun news did lead server hardware makers down about 9 percent. PC software companies posted the sharpest gains, rising almost 7 percent.
Shares of Microsoft, which rose $5.50, or almost 10 percent, to $61, helped boost the software sector. The software giant met lowered expectations for its fiscal second quarter Thursday.
The Redmond, Wash.-based company reported earnings of $2.62 billion, or 47 cents a share. A consensus of analysts polled by First Call had projected quarterly earnings of 47 cents per share. A year earlier, Microsoft's net income topped $2.44 billion, or 44 cents a share.
The CNET tech index rose 17.78 to 2,365.38. Losers edged out winners, with 51 of the 96 stocks in the index falling, 44 rising and one remaining unchanged.
Other earnings news weighed heavily on the Nasdaq.
ADC Telecommunications said earnings for the first quarter ending Jan. 31 will be lower than Wall Street expectations. The shares fell $5.75, or nearly 27 percent, to $15.56.
The telecom equipment maker now expects sales of $800 million for the quarter, compared with $594 million last year, and pro forma earnings of 5 cents to 7 cents a share, compared with 7 cents last year.
Wall Street expected the company to make earnings of 12 cents a share and revenue of $881.7 for the quarter, the consensus estimate of 21 analysts surveyed by First Call. ADC attributed the shortfall to slower spending by telecom companies on equipment.
CMGI said Thursday that it is unlikely to meet its revenue target of $1.65 billion for the fiscal year ending July 31. The Internet holding company also said it will miss its gross margin target of 30 percent for the fourth quarter of this year.
The company's shares fell $1.16, or nearly 17 percent, to $5.69.
Inktomi fell $2.13, or 12 percent, to $15.38. The Internet software maker said its loss widened to 31 cents a share in the first quarter ended Dec. 31--including charges related to stock option plans, goodwill, and research and development--from 8 cents a year earlier.
Shares of Critical Path also fell after the company reported bigger fourth-quarter losses before charges and lowered expectations for the first quarter. The shares fell $11, or 55 percent, to $9 on a volume of 38 million shares, more than 22 times the stock's average daily volume of 1.7 million shares.
Some companies had good news.
Commerce One rose $6.34, or 29 percent, to $28.03 after it posted a smaller-than-expected loss on surprisingly strong sales in its fourth quarter Thursday, losing $10.8 million, or 5 cents a share.
Sales surged to $191.4 million, an increase of 1,033 percent, from the year-ago quarter, when it lost $11.7 million, or 8 cents a share, on sales of $16.9 million. The company also raised estimates for fiscal 2001 and predicted profitability by the second quarter.