Telecom warnings, accounting woes send stocks lower

AP Business WriterNEW YORK (AP) -- Spooked by weak sales predictions and accounting investigations in the telecommunications and technology sectors, investors collected profits Tuesday and left the stock market with a mixed close.

Tech stocks retreated but blue chips scratched out a small gain. Analysts said investors, after pushing tech prices higher last week, were shifting away from the volatile sector until earnings prospects improve or stocks become cheaper.

The Dow Jones industrial average closed up 21.11, or 0.2 percent, at 10,632.35, according to preliminary calculations. It was also the Dow's second straight day to close above 10,600 -- a level last reached in July.

Broader stock indicators fell. The technology-focused Nasdaq composite index dropped 32.37, or 1.7 percent, to 1,897.12. The Standard & Poor's 500 index fell 2.68, or 0.2 percent, to 1,165.58.

Although Tuesday's selling coincided with disappointing news, many analysts had predicted a pullback. Stocks have been steadily moving higher all month, with the Nasdaq advancing 7 percent last week, leading to speculation that Wall Street was ready for some retrenchment.

"The market has been very strong of late and was due for a pause to refresh, regardless of whether there was good news or bad news," said Alfred E. Goldman, chief market strategist for A.G. Edwards & Sons Inc.

Stock prices also remain a concern. Although Federal Reserve Chairman Alan Greenspan said last week that a recovery from the recession "is already well under way," jittery investors still are worried that the recovery will be muted and profits lackluster. They fear that some stocks have risen too much given the uncertainty.

First-quarter earnings season, which begins next month, is expected to provide more indications about the future. But no one knows whether the reports will be strong enough to sustain the market's advance.

Wall Street punished stocks it feared wouldn't deliver big returns. Lucent slid 66 cents, or 10.5 percent, to $5.60, while Nokia lost $1.41, or 6 percent, to $22.09, after the telecommunications companies each reduced sales forecasts.

Microsoft tumbled $1.80 to $62.54 on a Goldman Sachs research note saying the bellwether's sales performance for the next fiscal year would be lower than many analysts predicted.

But IBM soared $3.26, or 3.1 percent, to $108.50 after a filing indicated that earnings from its core businesses were stronger than earlier statements indicated.

IBM is a Dow component and its gains helped push the index slightly higher. The Dow was also helped by Merck, which rose 75 cents to $63.49 as investors looked for alternatives to technology.

"The reason the market is struggling is because it's moved from being undervalued in February to overvalued now," said Hugh Johnson, chief investment officer at First Albany Corp. "The focus of investors has shifted to earnings, and whether we are out of the earnings recession. I think it's too early to know."

In the wake of Enron's collapse, investors were hypersensitive to any hint of accounting irregularities.

WorldCom and Qwest Communications International dropped significantly on reports that the Securities and Exchange Commission was looking into their bookkeeping. WorldCom lost $1.08, or 12 percent, to $7.93, while Qwest shed 51 cents, or 5.4 percent, to $8.95.

Declining shares narrowly led advancers on the New York Stock Exchange. Consolidated volume came to 1.67 billion shares compared with 1.52 billion Monday.

The Russell 2000 index fell 1.85 to 498.90.

Overseas, Japan's Nikkei stock average closed down 2.62 percent. Germany's DAX index slipped 1.2 percent, Britain's FT-SE 100 lost 0.1 percent, and France's CAC-40 fell 0.8 percent.

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