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Markets hit lowest points in months

Gloomy reports from server and optical networking companies help drive technology stocks lower, bringing the Nasdaq and Dow to their lowest level in more than four months.

Gloomy reports from server and optical networking companies helped drive technology stocks lower Thursday.

Broad indexes fell to their lowest levels in more than four months. The Nasdaq composite index dropped 51.49 to 1,791.68, and the Dow Jones industrial average slid 171.32 to 9,919.58.

At the opening bell Thursday, pop musician Michael Jackson visited the Nasdaq site, a day after his 43rd birthday, to promote his two upcoming New York City concerts. A crowd seven rows deep and cordoned off by NYPD barricades screamed and held up signs to greet him. The event didn't appear to faze investors, who were preoccupied by the slackening economy.

Reports on jobless claims and personal spending painted a mixed picture of economic recovery.

"The labor market is stabilizing," wrote Merrill Lynch analyst Bruce Steinberg in a research note following a report on initial jobless claims. The Labor department's report showed claims declined 1,000 to 399,000 in the week ending Aug. 25. However, continuing claims increased 6,000 to 3.17 million, their highest level since 1992, indicating the job market is still tough.

A report on consumer spending showed Americans are keeping their wallets closed despite tax rebate checks. Spending rose only 0.1 percent last month to a $7.085 trillion annual rate, the lowest monthly gain since October 2000. But "spending on nondurable goods and services remained healthy," noted Steinberg. According to the Commerce Departments report, spending on those items rose 0.6 percent and 0.2 percent respectively. "Rebate checks should help boost consumer spending going forward," the analyst predicted.

The Commerce Department also reported that personal incomes grew by 0.5 percent in July to a $8.786 trillion annual rate, the biggest increase since a 0.6 percent gain in December 2000.

In company news, Sun Microsystems' warning Wednesday that losses are so big that it won't be profitable in its first quarter ruined the day for tech investors. Sun shares were the most actively traded on the Nasdaq, down $2.36 to $11.07. The server and storage maker announced in its midquarter report that it's unlikely to break even due to ongoing soft demand in Europe and Japan.

Corning lost $2.55 to $12.05. The maker of optical fiber and cables on Wednesday said it will slash around 1,000 jobs and that growth in the optical fiber market will be less than expected for 2001.

Tech Data rose $5.17 to $38.52 after the hardware and software distributor said on Wednesday that its second-quarter earnings topped expectations. Earnings were $27.2 million, or 49 cents a share, ahead of First Call's predicted 41 cents a share, but down from $40.8 million, or 72 cents a share, a year earlier.

One of the few heavily traded gainers Thursday was WorldCom, up 44 cents to $12.88. The telecommunications company said Wednesday that its 2001 financial performance was on track and mentioned that 2002 capital spending will be lower than in 2001.

Software stocks took a beating after Goldman Sachs analyst Thomas Berquist reduced estimates on Veritas Software and some other infrastructure software companies, citing the economic downturn's continued impact on the sector. Veritas was off $3.34 to $28.37, and CNET's Server Software index was down around 6 percent.

Among other heavily traded techs, Intel slipped 97 cents to $27.13, Microsoft lost $3.31 to $56.94, Oracle fell $1.35 to $12 and Cisco Systems slipped $1.07 to $16.01.

Amazon.com fell 50 cents to $8.69, AOL Time Warner fell $2.50 to $36 and Yahoo lost 82 cents to $11.32.

Staff and Reuters contributed to this report.

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