All News Is Bad News

Subpar earnings reports and weaker than expected economic news combined for a one-two punch that sent stocks to the mat on Friday.

The Nasdaq plunged 47 to 1376, the S&P 500 lost 12 to 901, and the Dow dropped 111 to 8586. Volume declined to 1.35 billion shares on the NYSE, but rose to 1.63 billion on the Nasdaq. Decliners led 21-11 on the NYSE, and 21-10 on the Nasdaq. Downside volume was 76% on the NYSE, and 83% on the Nasdaq. New highs-new lows were 112-17 on the NYSE, and 73-31 on the Nasdaq.

Microsoft plunged 7% after missing revenue estimates and guiding March quarter and full-year estimates lower. The company declared a 2-for-1 stock split – and a 16-cent dividend that caught everyone by surprise. Some saw the dividend as a savvy political move, supporting the Bush Administration’s effort to eliminate the dividend tax and signaling that the company believes its legal troubles are largely behind it. Dividend-paying stocks are often seen as more stable, but some worried that a dividend could signal that Microsoft is maturing and is not the racy growth stock it once was.

IBM fell 5.5% after topping revenue and earnings forecasts, but offering guidance that was more guarded than analysts had hoped for. Bear Stearns downgraded Big Blue based on valuation.

eBay was a rare bright spot, surging 5% after beating estimates and raising guidance. Sun managed a small gain after beating estimates Sun also said it plans to simplify Java.

Juniper and Scientific Atlanta fell despite better than expected results, and AMD plunged 16% after missing estimates.

AOL , down 3.2%, named CEO Richard Parsons as chairman.

Oracle , which lost 5.8% on Microsoft’s warning, unveiled Web services portal software.

Rambus , down 1.5%, and Veritas, off 4.4%, face document destruction and accounting investigations, respectively.

Yahoo , off 2%, projected a slight increase in online spending, which the company and ACNielsen said is being restrained by weakness in the broader economy.

Transmeta fell 9.5% on news the company is moving into competitive territory.

Genuity moved closer to being acquired by Level 3 .

SONICblue plunged 20% on news that the company is mulling its future.

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