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Blue chips' decline offsets tech rally

NEW YORK - Investors abandoned blue chips and other large-cap stocks Friday as a lower-than-expected consumer confidence report fed into Wall Street's fears of an economic slowdown. The selloff overshadowed a technology sector rally prompted by robust earnings from Dell Inc.

Energy and utility stocks bore the brunt of the selling, as the week's sharp decline in oil prices led investors to shift their assets out of these sectors, which had led the market's gainers for much of the year. Treasury bonds benefited as investors sought less risk, but a few investors still took a chance on the tech sector, which had a boost from strong earnings by Dell.

Blue chips and other stocks were also held back by the University of Michigan's consumer sentiment index that showed a larger-than-expected drop in confidence. The May index came in at 85.3, substantially lower than the 88.3 expected on Wall Street.

"The consumer numbers out there were very frightening," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "The consumer is in the driver's seat in this economy, and a lot of big names depend on healthy consumer spending."

The Dow Jones industrial average fell 49.36, or 0.48 percent, to 10,140.12. The Dow had fallen more than 100 points in afternoon trading before rallying higher at the close.

Broader indicators were mixed. The Standard & Poor's 500 index was down 5.31, or 0.46 percent, at 1,154.05, but the tech-focused Nasdaq composite index gained 12.90, or 0.66 percent, to 1,976.80.

Wall Street's nervousness was apparent in the Treasury bond market, where investors were turning to safer bonds amid lingering concerns after the downgrade of big automakers' debt. The yield on the 10-year Treasury note fell to 4.13 percent from 4.17 percent late Thursday, the lowest yields since mid February. The dollar made strong gains against most major currencies, especially the euro, which fell to a seven-month low against the dollar.

The Dow and S&P 500 finished the week substantially lower, but the tech rally pushed the Nasdaq to a small gain. Despite lower oil prices and a spate of strong economic data, an earnings warning from Wal-Mart Stores Inc. enhanced investors' nervousness about the economy, prompting two triple-digit losses for the Dow. For the week, the Dow lost 1.98 percent, the S&P fell 1.48 percent, and the Nasdaq gained 0.48 percent.

After falling substantially most of the week, oil prices pushed modestly higher in late trading, with a barrel of light crude settling at $48.67, up 13 cents, on the New York Mercantile Exchange.

The overall drop in oil prices this week, however, prompted many investors to abandon the utility and energy stocks that led the market through much of this year. Among utilities, Exelon Corp. lost $1.75 to $45.25, and TXU Corp. tumbled $3.80 to $77.07. Among energy companies, Williams Cos. fell 56 cents to $16.40, and XTO Energy Inc. dropped $1.40 to $27.50.

Dell led the tech sector rally, climbing $2.72 to $39.33 after it reported a 28 percent increase in profits. Investors saw the computermaker's strength as a sign that companies were still making investments in computers and other big-ticket items. Dell forecast higher revenue growth for the current quarter, which led to an upgrade by analysts at UBS.

Auto parts maker Delphi Corp. climbed 11.8 percent, or 40 cents, to $3.80 even as the company posted a loss for the quarter because of weak demand as many automakers cut back on their production. Higher materials costs hurt the company, which missed Wall Street's loss estimate by 37 cents per share. But Delphi said it can still achieve its financial goals for the year.

Luxury retailer Tiffany & Co. said strong sales in the United States helped offset weak Japanese sales, resulting in a 9 percent increase in profits from last year. The company beat analysts' expectations by 3 cents per share. Tiffany nonetheless lost 47 cents to $29.30 as consumer spending concerns took their toll on retailers.

Declining issues outnumbered advancers by nearly 5 to 2 on the New York Stock Exchange, where volume came to 1.72 billion shares, compared with 1.58 billion at the same point Thursday.

Several erroneous bids for lightly traded stocks on the Nasdaq were reported early in Friday's trading session. Orders executed against those bids - some as high as $950 per share for a stock trading in the $4 range - were broken and removed from the tape, with the sellers getting their stock back and buyers reimbursed, the Nasdaq said. The incident will be investigated.

The Russell 2000 index of smaller companies was down 4.87, or 0.83 percent, at 582.02.

Overseas, Japan's Nikkei stock average fell 0.26 percent. In Europe, Britain's FTSE 100 was down 0.14 percent, Germany's DAX index rose 0.2 percent, and France's CAC-40 added 0.06 percent.

[Last modified May 14, 2005, 01:17:08]