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Posted at 11:45 a.m., Thursday, October 23, 2003

Drug shares strong, tech stocks struggle

Hawai'i Stocks
Updated Market Chart

By Hope Yen
Associated Press

NEW YORK ó Tech stocks extended their decline today as investors locked in gains after disappointing results from Computer Associates. Drug shares, hit hard the previous session, rebounded on strong earnings from Eli Lilly and Bristol-Myers.

Analysts said investors were being cautious after sending the marketís key indexes to 52-week highs last week. Many wanted to see not only solid earnings but also better-than-expected revenue and outlooks before making major stock purchases.

"The earnings numbers are pretty good, but the large run-up in stocks this year discounts a lot of that," said John Caldwell, chief equity strategist for McDonald Financial Group. "The bottom line is the market still looks relatively expensive."

The Nasdaq composite index dropped 12.56, or 0.7 percent, to 1,885.51, after a decline of 42.83 yesterday.

Blue chip shares finished modestly higher. The Dow Jones industrial average closed up 14.89, or 0.2 percent, at 9,613.13, following a two-day loss of nearly 180 points. Earlier in the day, the Dow fell as much as 46.51 points.

And the Standard & Poorís 500 index rose 3.38, or 0.3 percent, to 1,033.74.

Computer Associates International Inc. dropped $2.13 to $23.02 after the software maker reported a wider quarterly loss and said this quarterís revenue will be lower than expected.

Sony Corp. fell $2.66 to $34.49 after the electronics and entertainment giant said earnings slid by 25 percent in the fiscal second quarter, citing in part losses from disappointing movie box office performance.

A sharp sell-off in Japan also pressured U.S. shares. Tokyo stocks slid 5.1 percent on the U.S. dollarís weakness against the yen as well as Wall Streetís recent declines on earnings disappointments. It was Japanís biggest single-day decline since Sept. 12, 2001 ó the day after the terrorist attacks.

After pushing stocks mostly higher since mid-March, U.S. investors are now cashing in gains on any hints of negativity. Analysts say it will be difficult for stocks to move substantially higher without a series of stunning profit outlooks or strong economic reports.

"There was a speculative runup ahead of the earnings season," said Hank Herrmann, chief investment officer at Waddell & Reed Financial, a mutual fund company. "Now, if you only beat estimates modestly, stocks are going to go down. If you beat significantly, you do get some additional move on the upside."

Drug shares were among the winners today after heavy losses yesterday. Eli Lilly & Co. rose $4.32 to $65.10 after reporting third-quarter profits that met estimates. And Bristol-Myers Squibb Co. gained 85 cents to $25.10 after notching a doubling of third-quarter profits that beat analystsí expectations.

An upbeat government report on employment, meanwhile, helped limit losses. The Labor Department said new jobless claims fell last week by a seasonally adjusted 4,000 to 386,000. It was the lowest level since Sept. 20 and the third straight week that claims have been below 400,000, a level associated with a weak job market.