Originally created 06/19/03

Blue chips fall on warnings from Eastman Kodak, Clorox; techs trade higher



NEW YORK -- Profit warnings from Eastman Kodak and Clorox unnerved Wall Street Wednesday, prompting investors to cash in some profits from two days of gains. Blue chips fell, but technology issues rose modestly, lifted in part by brokerage upgrades of three semiconductor companies.

While the warnings raised fears that investors had misread signs of economic recovery, some pullback is to be expected following more than three months of rallies on Wall Street.

Most market watchers remain optimistic about Wall Street's long-term prospects, saying the latest rally has more staying power than the rallies that fizzled out in the bear market.

"Right now indications are that this could be more than a bear market rally. The jury is still out, but I think for the bulls there have been some wins, (like) the S&P 500 taking over the 1,000 area," said Todd Salamone, director of trading at Schaeffer's Investment Research in Cincinnati.

In late afternoon trading, the Dow Jones industrial average was down 61.41, or 0.7 percent, at 9,261.61, following a two-day gain of 205.90, nearly all of which resulted from a big rally on Monday.

The market's broader gauges were mixed. The tech-heavy Nasdaq composite index rose 4.11, or 0.3 percent, to 1,672.55.

But the Standard & Poor's 500 index fell 4.80, or 0.5 percent, to 1,006.86, having finished Monday's session at its highest close since June 19, 2002, when it stood at 1,019.99.

By the end of Tuesday's session, the Dow had risen 24 percent from where it stood on March 11, when the heavy buying began. Meanwhile, the Nasdaq has surged 31 percent and the S&P 500 26 percent since then.

Technology has been the biggest winner, which analysts attribute to signs that capital spending on tech products is increasing. Many market experts believe that a rebound in the market and the overall economy is contingent upon a resurgence in tech spending.

"There is an increasing amount of confidence that we are going to get the recovery we have been hoping for, for the last year. There are some indications that tech spending by small- and intermediate-sized companies is starting to pick up," said Matt Brown, head of equity management at Wilmington Trust.

Brokerage house upgrades of semiconductor companies also helped the tech sector to advance Wednesday.

PMC-Sierra rose 71 cents to $13.11, Vitesse Semiconductor advanced 58 cents to $5.64, and Applied Micro Circuits inched up 4 cents to $6.26. Lehman Brothers raised its rating on the three chip makers to "equal-weight" from "underweight."

But blue chip issues fell on disappointing earnings news.

Dow industrial Kodak dropped $3.33 to $28.66 after cutting its second-quarter earnings outlook.

Clorox fell $3.05 to $42.20 after reducing its quarterly and annual profit estimates.

Among other losers, UBS declined $1.05 to $56.80 after announcing it was cutting 500 investment banking jobs, or 3 percent of its investment banking work force, in an effort to deal with the slow economy.

Declining issues outnumbered advancers nearly 9 to 5 on the New York Stock Exchange. Volume was light at 1.14 billion shares, just ahead of 1.13 billion at the same point Tuesday.

The Russell 2000 index, which tracks smaller company stocks, fell 1.41, or 0.3 percent, to 456.60.

Overseas, Japan's Nikkei stock average finished Wednesday up 0.7 percent. In afternoon trading in Europe, France's CAC-40 and Britain's FTSE 100 each rose 0.4 percent, while Germany's DAX index gained 0.5 percent.

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