Dow drops as investors cash in on 2-day rally

NEW YORK -- Wall Street retreated Tuesday, sending the Dow Jones industrials falling more than 150 points as investors cashed in their winnings from the market's spectacular two-session rally.

The Dow closed down 153.41, or 1.5 percent, at 10,433.41, giving back just under a third of the 480 points gained during the previous two sessions. The Standard & Poor's 500 index fell 7.70, or 0.7 percent, to 1,146.14.

The technology-focused Nasdaq Composite Index proved steadier, its losses mitigated by optimism about earnings prospects at bellwether Intel. The Nasdaq advanced 6.97, or 0.4 percent, to 1,866.29.

Analysts said the market's overall mood was cautious, but still showing signs of bullishness.

"This is just normal profit-taking after a fairly strong run in stocks," said Bill Barker, investment consultant at RBC Dain Rauscher. "The mood in the market is substantially better than it was just two weeks ago, when there was a lot of gloom around. People are getting their hopes back up again."

Blue chips fell on losses in retailers including Wal-Mart, which fell $2.22 to $60.76. Home Depot slid $2.40 to $47.50, a 4.8 percent loss. The sector had been steadily moving higher on anticipation it would benefit when the economy stabilized.

Consumer goods companies also fell. Procter & Gamble lost $1.92 to $85.06.

Tech stocks were more mixed. Microsoft dropped 22 cents to $63.08. But Intel advanced 85 cents to $32.70 after Morgan Stanley upgraded the stock to "strong buy" from "outperform," citing the prospect for better personal computer sales this year.

The tech sector's relatively strong performance might also be attributed to the fact it had a smaller advance than blue chips in the recent run-up. As a result, it had fewer gains to lose in profit-taking -- and investors might have decided it was time to invest there.

"The Dow is catching its breath after its big rally and guess what's getting the move back up?" said Ralph Acampora, director of technical research at Prudential Securities. "Technology, because it's lagged behind. This is just catch-up."

Wall Street shrugged off a report from the Institute of Supply Management that showed non-manufacturing companies had their strongest rate of growth in business activity and new orders in 15 months during February. The data was the latest indication that the economy is emerging from recession, but it wasn't enough to discourage profit-taking on lingering worries that this rally will eventually fizzle.

Although the tech-focused Nasdaq remains below where it started 2002 and the S&P is near its start for the year, the Dow has climbed about 4.1 percent since Dec. 31.

Still, there is a growing consensus that the economic and market outlook is turning around.

"This is the best action we've seen in a long time," Acampora said. "I'm very optimistic that this is the beginning of a positive upside mood for the market."

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