Profit-taking pulls back stocks after early boost

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By Hope Yen
Associated Press

NEW YORK — Wall Street pulled back in late-day selling today after investors, still worrying that the market's advance might have come too fast, decided to collect profits.

The Dow Jones industrials climbed as much as 87 points after a surprising drop in jobless claims before losing momentum and turning lower in the afternoon. Analysts said short-term traders in particular were concerned that the market might have climbed too high.

"Considering that we had a 25 percent move in the market in the last few months, the fact that we're seeing a little profit-taking is not only expected, it's healthy," said Tim Smalls, trader at SG Cowen Securities.

The Dow closed down 81.73, or 0.9 percent, at 9,112.51, following a two-day gain of 97 points.

The broader market also finished lower. The Nasdaq composite index declined 17.73, or 1 percent, to 1,701.45. The Standard & Poorâs 500 index fell 7.01, or 0.7 percent, to 981.60.

The Labor Department said new jobless claims dropped by a seasonally adjusted 29,000 to 386,000, the lowest level in five months. It also was the first time since February that claims fell below 400,000, a level associated with a weak job market. Analysts had expected a slight rise in claims.

"The unemployment claims (report) certainly helped," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc. "If you donât get stabilization in the jobs market, then obviously the question is how strong the recovery will be."

Stock trading has been choppy in recent weeks as investors waded through the second-quarter earnings season. Analysts say investors want to see proof of a solid economic recovery, having sent stocks surging since mid-March.

Decliners included Raytheon, which fell $1.24 to $32.32, after the defense contractor reported a drop in operating earnings that still beat analystsâ estimates. The company also raised its sales outlook, but left its earnings forecast unchanged.

SBC Communications lost 67 cents to $23.30 after the local telephone company posted a drop in profits; however, the results still beat estimates by a penny.

But AT&T advanced 47 cents to $20 after the nation's largest long-distance telephone company reported quarterly profits that handily beat expectations; it also plans to raise its dividend to 23.75 cents from 18.75 cents.

American International Group rose $1.95 to $62.20 after the insurer reported earnings that came in higher than Wall Streetâs estimates.

And Computer Associates surged $2.98, or 13.4 percent, to $25.22, after the software maker reported profits that beat estimates by 5 cents per share; it also was the companyâs first profit in more than two years.

Advancing issues finished even with decliners on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, a barometer of smaller company stocks, fell 0.89, or 0.2 percent, to 465.25.

Japan's Nikkei stock average finished 0.6 percent higher today. France's CAC-40 advanced 2.2 percent, Britain's FTSE 100 gained 1.5 percent and Germany's DAX index climbed 2.1 percent.