On Friday, the Nasdaq composite index closed down 14.07 at 2,626.50, and the Standard & Poor's 500 index dipped 8.27 at 1,318.55. The Dow Jones industrial average fell 84.17 at 10,525.38.
Large-cap tech stocks weighed the Nasdaq down. Sun Microsystems closed down $1.50, or about 5 percent, to $30.44; Microsoft dipped $1.50 to $53.50; and Cisco Systems lost $1.06 to $38.06.
The Nasdaq generated a sizable volume of 2.51 billion shares, with eight stocks advancing for every five declining. Volume was heavy on the New York Stock Exchange, where 1.26 billion shares exchanged hands and the ratio between winners and losers was about even.
The markets recorded a strong week despite the lackluster finish. The Nasdaq finished up 9 percent from last week. The S&P 500 closed up about 2 percent, while the Dow shaved off 1 percent.
This week's rise for the Nasdaq built on another positive rise the week before, the first time the index has strung together two consecutive weeks of gains since August.
"The psychology is changing," said Bryan Piskorowski, a market strategist at Prudential who was impressed with the markets' ability to sidestep bad earnings news from tech bellwethers and still finish higher.
Piskorowski noted that if gloomy earnings news from tech titans like Nokia, Yahoo, Gateway and Hewlett-Packard had hit the Street three months ago within the span of one week, the markets would have dived.
"There's an Old Market saw that says, 'When the market does not listen to bad news, it's good news,'" said Jeffrey Saut, chief market strategist at Raymond James.
Saut added that it is too soon to say whether the bears have gone back into hibernation. He described the recent Nasdaq burst as a "compression rally."
"When you compress a spring 55 percent, you can't compress it any more without expecting it to spring back," he said, referring to the Nasdaq's decline from its high of 5,048.62 last March.
Traders received mixed economic news on Friday. The Labor Department reported that its producer price index (PPI), a reading of inflation pressures before they reach the consumer, was unchanged in December.
Many analysts had been expecting an increase of 0.3 percent because of the steep rise in energy prices. But the report caused some concern anyway. Excluding the volatile food and energy sectors, the "core" PPI rose 0.3 percent, the largest jump in seven months.
Still, core PPI inflation at the producer level remained mostly tame and increased only 1.2 percent in 2000 compared with 1999, which gives the Federal Reserve the green light to continue its interest-rate reduction plans.
Retail sales in December managed to post a tiny 0.1 percent gain. Wall Street had expected sales would plunge by as much as 0.5 percent because of the disappointing holiday sales season. However, the Commerce Department revised sales figures for the October-to-November period from a 0.4 percent decline to a 0.5 percent drop.
On Friday, HP lost $1.69 to close at $30.69. The company announced Thursday that its first-quarter earnings would fall short of analyst estimates, with an improvement in sales growth not expected until the second half of the year.
HP projected that its earnings for its quarter ending Jan. 31 will be 35 cents to 40 cents per share. Analysts polled by First Call had projected earnings of 42 cents a share.
HP CEO Carly Fiorina said in a statement that the economy had slowed dramatically since the last time the company projected growth. HP had been expecting a "soft landing" in the economy, she added, but there had been a "significant change in market conditions in recent weeks."
Gateway also unleashed bad earnings news in the PC sector, attributing its shortfall to slower-than-expected demand. The computer maker posted fourth-quarter earnings below even lowered expectations and slashed its 2001 forecast again, saying it will cut more than 10 percent of its work force.
Excluding charges, Gateway earned $37.6 million, or 12 cents per share, on sales of $2.37 billion. Analysts had been expecting Gateway to earn 37 cents per share on revenue of $2.64 billion.
Gateway fell $1.80, or almost 8 percent, to $21.10.
Of the 18 sectors tracked by CNET Investor, computer data storage companies and server-hardware makers were the day's largest losers, falling about 4 percent each. Distributors of computer components posted the sharpest gains, rising about 2 percent.
The CNET tech index fell 30.68 at 2,216.28. Decliners edged out advancers, with 54 of the 96 stocks in the index falling, 39 rising and three remaining unchanged.
Earnings news beat down shares of software maker Ariba, which fell $8.18, or almost 19 percent, to $35.19. Volume reached 84.8 million shares, nearly 15 times the stock's average daily volume of 5.7 million shares. Ariba was the most actively traded stock on the Nasdaq.
Ariba beat consensus estimates Thursday with $170 million in revenues and robust earnings of 5 cents a share, excluding charges, for its fiscal first quarter. Analyst consensus expected a profit of 2 cents per share on revenue of $154.75 million, according to First Call.
Including noncash charges, Ariba lost $347.6 million, or $1.48 per share.
Revenue growth for the quarter was 26 percent from the previous quarter, but well below the 70 percent to 100 percent gains investors have come to expect from the company.
On the bright side, DoubleClick rose $3.50, or 31 percent, to $14.75. The Internet advertising company reported break-even results on a per-share basis for the fourth quarter, excluding noncash and nonrecurring items. It was expected to lose 2 cents, the average estimate of analysts polled by First Call.
Shares of Excite@Home closed up $1, or nearly 13 percent, at $8.72. AT&T said rivals Cox Communications and Comcast have agreed to sell their stakes in Excite@Home for about $2.9 billion of AT&T stock as part of a buyout plan announced last March.
Shares of America Online traded lower on the first day after its merger with Time Warner closed. AOL dipped 76 cents Friday to $46.47.