Wall Street closed broadly but modestly lower on Thursday as tech giant Hewlett-Packard warned of disappointing earnings, and as bond yields rose after a higher-than-expected inflation report.
Meanwhile, Asian stock markets were mixed after diving on Wednesday amid Indonesia's growing crisis.
The Dow Jones industrial average fell 39.61 points from Wednesday's record high to close at 9,172.23.
The Dow's loss could have been worse, considering that shares of Hewlett-Packard, one of the 30 Dow stocks, tumbled $11.31, or 13.9%, to $70.31 after the company said its results for the quarter ended April 30 will be below expectations. It blamed personal computer price wars and weaker Asian sales.
Indeed, the Dow fell nearly 100 points at the opening, but quickly recovered--helped by IBM's rise of $3.94 to a record $125.81. IBM benefited from some of the cash exiting HP shares, traders said, in light of a bullish presentation IBM's chief executive made to analysts on Wednesday.
Still, the broad market was down for a fourth straight session. Losers topped winners by 1,710 to 1,248 on the New York Stock Exchange and by 2,400 to 1,808 on Nasdaq.
The Nasdaq composite eased 0.82 point to 1,865.36. The blue-chip Standard & Poor's 500 slipped 1.49 points to 1,117.37.
Bonds set a poor tone for stocks. After declining Tuesday and Wednesday, yields rose after the government said consumer price inflation rose at a faster-than-expected--albeit still low--pace in April. "It's the first bad CPI number we've had for a long time," said Charles Parkhurst, head of government bond trading at Salomon Smith Barney. "People are a little concerned that this could be the beginning of a trend."
Still, the Federal Reserve Board, meeting on Tuesday, is expected to leave interest rates alone for now.
On Thursday the bellwether 30-year Treasury bond yield edged up to 5.98% from 5.94% Wednesday.
In Asian trading, Singapore's main stock market index dove 2.3%, but Hong Kong rebounded 1.3% and South Korea rose 1.8%. Those markets have been pummeled in recent days by fears that Indonesia's woes will trigger another regionwide crisis.
But so far, "Wall Street is continuing to shrug off the Asia problem as stock-specific," said Michael Metz, managing director at CIBC Oppenheimer. Hewlett-Packard "really warned Wall Street that it's too optimistic in considering the impact of Asia. But generally, the reaction was that maybe we don't want to own HP, but we want to own something else in group."
Among Thursday's highlights:
* Microsoft helped bolster the tech group, rising $2 to $88.94 as it agreed to negotiate with the Justice Department over antitrust charges. Other tech issues gaining included Peoplesoft, up $2 to $48.38; Microsoft archrival Netscape, up $1.56 to $28.69; and Remedy, up $1.22 to $20.41.
* Some industrial issues gained amid continuing optimism over the economy. Ingersoll Rand rose 75 cents to $47.13, Illinois Tool Works jumped $2.38 to $71.81 and Navistar jumped $1.19 to $28.69.
* Among rumored takeover targets, Wells Fargo surged $4.38 to $382.88 on talk that a merger deal with US Bancorp is near. US Bancorp added 6 cents to $119.06.
Also, BellSouth closed up $1.56 at $68.19 after trading at a record $69.25. Speculation rose this week that BellSouth will be acquired, after SBC Communications bid for fellow Baby Bell Ameritech.
* Among Southland issues, PBOC Holdings, parent of People's Bank of Los Angeles, rose 25 cents to $14.50 on Nasdaq. The company went public Wednesday at $13.75 a share.
Also, Bonded Motors fell 13 cents to $10.63. After markets closed, the company said it filed to sell 2 million shares in a public offering.