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Dow, Nasdaq post 120-point losses

Stocks fall across the board as investors await an indication of the direction of interest rates.

The major stock indexes fell moderately as investors awaited an indication of the direction of interest rates.

"The overall market is going to struggle until the next (interest rate) meeting," said Bill Meehan, chief market analyst at Cantor Fitzgerald. "Breadth has not been good, and people are rotating in and out of sectors on a daily basis."

The Nasdaq composite index fell 127.11 to 3,936.90 and the Standard & Poor's 500 index dropped 26.95 to 1,452.18.

The Dow also fell 121.62 to close at 10,376.12, led by Honeywell and Philip Morris.

At the end of regular trading, Intel closed down $4.94 at $134.06; Microsoft fell 81 cents to $79.88.

The CNET tech index lost 73.74 to close at 2,959.13. Losers edged out winners, with 77 of the 97 stocks in the index falling, 19 rising and one remaining unchanged.

Of the 18 sectors tracked, nearly all posted losses. Server hardware makers and Internet e-tailers posted the sharpest declines, falling more than 4 percent each. Computer peripheral makers were the day's only gainers, climbing a scant 0.1 percent.

"The market looks kind of lousy," said Richard Peterson, a market strategist at Thomson Financial Securities Data. He noted that so-called old economy stocks on the Dow Jones industrial average such as General Motors, Honneywell, and McDonald's have taken hits recently.

Some analysts expect the Fed to leave rates alone when it meets next week, which could provide a boost for stocks. "To have any more rate hikes would be too much fiscal medicine, so they'll probably wait until (the next meeting in August) and take the patient's temperature then by looking at more data," said Peterson.

Earnings news from software maker Manugistics sent its shares up $13.50, or 54 percent, to $38.38, making it the largest percentage gainer on the Nasdaq. Volume topped 4.7 million shares, more than seven times the stock's daily average.

A downgrade from Prudential Securities caused shares of Mercury Computer Systems to drop $10.66, or about 28 percent, to $27.59 on volume of 1.6 million shares, more than five times its daily average.

Among members of the CNET tech index, Yahoo fell $11.13 to $131.69 after Merrill Lynch said that the Internet portal's second-quarter earnings would be less than stellar.

The Philadelphia semiconductor index fell 58.99, or almost 5 percent, to 1,210.31, led by Linear Technology, which lost $7 to close at $65.31.

Shares of business-to-business company Clickservice Software remained flat in first-day trading, despite an improving market for initial public offerings. The shares closed at their offering price of $7 on volume of 6.2 million shares.

AT&T gained 88 cents to $35.88 after a federal appeals court said the company cannot be forced it to lease its high-speed cable Internet connections to competitors. Shares of Excite At Home, the AT&T affiliate that provides the service, jumped $1.94, or 10 percent, to $20.88.