Technology stocks tried to ride the coattails of Microsoft today, but instead had the legs pulled out from under their rally by Motorola Inc.
Microsoft's announcement that it plans to pay out $32 billion to shareholders got credit for a morning rally that lifted the Nasdaq Stock Market composite index by 15 points and added almost 90 to the Dow Jones industrial average.
But by afternoon market watchers were blaming weak results from Motorola for an ugly U-turn that drove the Nasdaq composite down to a new low for the year of 1,874.37 -- a loss of almost 43 points.
The Dow Jones industrials closed off almost 103 points at 10,046.13 and the Standard & Poor's 500 stock index dropped nearly 15 points to 1,093.88.
Motorola is a bellwether for the mobile communications equipment industry, but investors feared the 5 percent drop in shipments of new cellular phones was a signal of a broader economic slowdown.
Today and Thursday are the two heaviest days of the quarter for earnings reports. What's worrisome to Wall Street is not that the second quarter numbers were bad -- many are coming in better than expected -- but that the outlook for the third and fourth quarters is not so good.
And some of the strong earnings reports did not really reflect what's going on. General Motors reported a 49 percent increase in profits, but investors know GM dealers are sitting on huge inventories of unsold cars and several new models are not selling as well as hoped.
Because so many companies are issuing cautious outlooks for the remainder of the year, Wall Street also is expressing some skepticism about the forecast of Federal Reserve Chairman Alan Greenspan that the economy will soon pick up.
Greenspan was back on Capitol Hill today, giving the House a rerun of the semi-annual economic report he gave the Senate yesterday. The economy is growing steadily, he said, and can handle an increase in interest rates over the next few months.
Wall Street seems to be betting that when Greenspan talks about a "measured" increase in rates, he means the Fed will crank them up by a quarter of a point four more times before the end of the year.
The bond market isn't waiting for the Fed to act. In the past two days, rates on 10-year treasury bonds have gone up roughly one-eighth of a point, their biggest increase in two months.