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Mon, Feb 19, 2001 EST
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Stocks Fall on Economy, Earnings Anxiety
By Amy Baldwin   Associated Press
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NEW YORK — Wall Street plunged back into pessimism Friday, sending stocks sharply lower after Nortel Networks, Dell Computer and Hewlett-Packard warned that their business will further slow this year. A spike in inflation increased the market's woes.

Afternoon news reports of a U.S. and British air attack over Iraq exacerbated the selloff. American and British planes reportedly struck Iraqi air defense sites in a mission to destroy threatening radar systems.

In heavy afternoon trading on Wall Street, the Dow Jones industrial average fell 146.08 to 10,744.94.

The tech-focused Nasdaq composite index tumbled 154.05 to 2,398.86 after advancing the previous two sessions. The broader Standard & Poor's 500 index declined 30.44 to 1,296.17.

The market's losses came largely from the technology sector.

Nortel plunged $9.91, or 33 percent, to $19.88. After the market closed Thursday, the fiber optics maker cut its profit outlook and raised its planned job cuts to 10,000.

A bleak outlook also hurt Dell, which fell $2.20 to $22.80. Dell announced late Thursday it missed earnings expectations by 1 cent and that it will cut 1,700 jobs.

"There's a combustible combination of bad news out there from the technology sector," said Alan Ackerman, executive vice president at Fahnestock & Co.

The Dow's tech losses were led by Hewlett-Packard, down $4.50 at $31.85. Hewlett-Packard also warned of challenging business conditions late Thursday. The computer maker's bad news spread to other Dow tech stocks, including Microsoft, down $2.63 at $56.19.

The litany of bad news from the tech sector combined, Ackerman said, to "bring back a lot of caution and exhaustion for traders who are trying to figure out where to go in the market, especially before a long, holiday weekend." The market is closed Monday in observance of Washington's Birthday.

Friday's losses were a dramatic retreat from the more optimistic approach investors had taken toward high-tech stocks in recent weeks. While Wall Street had tolerated individual companies' reduced business forecasts, the news of three dismal outlooks at once rattled the market.

Investors also bid stocks lower after the Labor Department reported wholesale inflation rose 1.1 percent in January, the biggest jump in a decade. The spike could diminish the chances that the Federal Reserve Board will lower interest rates at its meeting next month.

The two cuts the Fed made in January are expected to help improve the sluggish economy and anemic corporate earnings in the second half of the year. Investors have been hoping for more reductions, although they were disappointed earlier this week when Fed Chairman Alan Greenspan indicated future cuts will be less aggressive than the market had wanted.

Declining issues outnumbered advancers nearly 2 to 1 on the New York Stock Exchange. Volume was 840.50 million shares, well ahead of 734.07 million at the same point Thursday.

The Russell 2000 index, which tracks the performance of smaller company stocks, was down 10.90 at 497.95.

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