NEW YORK, (Reuters):
UNITED STATES stocks sagged sharply on Monday, with technology stocks bearing the brunt of the selling, after printer maker Lexmark International Inc. warned of soggy profits and a Wall Street brokerage cut its investment rating on cell phone maker Motorola Inc.
Investors locked in profits from Friday's big rally, taking a cautious stance amid a rush of quarterly earnings reports, traders said. About a third of the companies in the Standard & Poor's 500 index will issue results this week.
Adding to the market's jitters was a savage sell-off in the bond market that catapulted the yield on U.S. 10-year Treasury notes to its highest level so far this year. The move in bonds sparked fears rising yields could lure investors out of stocks and hurt the market for mortgage refinancing.
The Standard & Poor's 500 Index closed at its lowest level in about three weeks on Monday, but after a strong springtime run it has still managed a gain of more than 20 per cent from its low of the year hit in mid-March.
"This is in response to that 25 per cent run-up (in stocks) and interest rates up 50 to 75 basis points," said Michael Vogelzang, president of Boston Advisors. "Couple that with anaemic earnings ... and you've got the perfect recipe for a 10 per cent pullback."
The Dow Jones industrial average ended with a drop of 91.46 points, or 1 percent, at 9,096.69, while the broader S&P 500 fell 14.52 points, or 1.46 per cent, to 978.80. The technology-laced Nasdaq Composite Index dropped 27.02 points, or 1.58 percent, to 1,681.48, according to the latest available data.
Volume was only moderate, which traders said helped exacerbate the market's decline. About 1.2 billion shares changed hands on the New York Stock Exchange, while 1.4 billion were traded on the Nasdaq.
MOTOROLA DOWNGRADED
Motorola, the world's No. 2 wireless telephone maker, fell 33 cents, or 4 per cent, to $8.72 after Credit Suisse First Boston cut its rating on Motorola to "underperform" from "neutral."
In the latest economic news, the Conference Board said its monthly index of leading indicators rose 0.1 per cent in June, slightly below economists' forecasts. Still, the private research group said June marked the gauge's third straight month of gains, suggesting that the struggling economy will pick up later this year.
