Tech stocks put on brakes as Dow rides ahead

The Nasdaq composite index fell 68.57 to 3,828.87, and the Standard & Poor's 500 index squeaked down 2.29 to 1,449.05. Experts blamed the declines on earnings warnings and the likelihood that many tech companies will not meet Wall Street's lofty expectations.

The Nasdaq fell about 70 points in early trading yesterday but fought back to close up 31.80 at 3,897.44.

The Dow Jones industrial average rose 77.60 to close at 10,765.52 led by 3M, which gained $4.69 to $86.44.

"The market is unwilling to take a stand with earnings warnings coming down the pike," said Bryan Piskorowski, a market strategist at Prudential Securities.

Piskorowski added that the markets are witnessing the aftermath of a cooling economy. As the growth rate recedes from red-hot levels to a more sustainable and healthy pace, the markets need to adjust to the fact that corporate earnings will not be as robust as they have been in the past year. "You should be careful what you wish for," he said.

Negative earnings pre-announcements are picking up from last year, according to First Call/Thomson Financial. As of yesterday, 186 companies have issued earnings warnings for the third quarter compared to 154 at this time last year.

Despite the gloomy mode, Goldman Sachs chief investment strategist Abby Joseph Cohen maintained her end of 2000 S&P 500 target of 1,575. She also reiterated her mid-2001 target of 1,650.

Cohen said she remained bullish on the fundamental outlook for U.S. stocks and the economy. Although many economists and investors have worried about rising oil prices and the advancing value of the U.S. dollar relative to the euro and other currencies, Cohen emphasized that the likelihood of inflation in the United States remains low.

Marquee tech companies led the Nasdaq lower. Cell phone maker Ericsson was the most active, falling $1.58 to $16.42 on a volume of 64.7 million shares at the end of trading. Cisco Systems fell $2 to $61.13; Intel dropped $1.58 to $61.48; Sun Microsystems fell $3.25 to $116.44; and Microsoft inched down 63 cents to $64.19.

Ericsson was downgraded to ''underperform'' from ''market perform'' by analyst Paul Sagawa at Sanford Bernstein. In a research note, Sagawa said ''Ericsson will fail to meet consensus expectations for revenue and profitability in both wireless infrastructure and handsets.

The CNET tech indexlost 103.21 to close at 2,996.65. Losers beat out winners, with 65 of the 78 stocks in the index falling, 16 rising and three remaining unchanged.

Of the 18 sectors tracked by CNET Investor, computer memory storage and telecommunications equipment makers posted the sharpest drops, falling 5 percent each. Computer service companies were one of the only two sectors that made gains, climbing 1 percent.

Investors warmly greeted the initial public offerings of OmniSky and TTM Technologies.

OmniSky, a provider of wireless Internet access for PalmPilots and other devices, climbed $5.64, or 47 percent, to $17.64 and was the largest percentage gainer on the Nasdaq. TTM, a supplier of circuit boards, rose $4.94, or almost 31 percent, to $20.94.

The news was not so fortunate for Lernout & Hauspie, the European speech-recognition software maker. The company announced today that it is cooperating with the Securities and Exchange Commission in an investigation of the company's earlier financial statements.

The stock fell $6.13, or about 29 percent, to $15.13 and set a new 52-week low of $12.56 compared to a high of $72.50. Volume topped 18 million shares, nearly 13 times more than the stock's average daily volume of about 1.4 million shares.

Some e-commerce companies took a hit. Shares of eBay fell $5.38 to $71.19 while Priceline.com dropped $1.88 to $21.56. Amazon.com, however, rose $2.56 to $40.06.

eBay was downgraded to ''buy'' from ''strong buy'' by analyst Daniel Ries at CE Unterberg Towbin. The 12-month price target was cut to $75 from $82.

Teradyne helped the Philadelphia semiconductor index fall 46.32, or nearly 5 percent, to 984.51. The world's biggest maker of semiconductor-testing equipment lost $12.69, or almost 26 percent, to $36.50, while chipmaker Advanced Micro Devices also dipped $5.19, or 17 percent, to $24.50.

An analyst at Prudential Securities said third-quarter orders at Teradyne will miss expectations.