Sun Dodges Downdraft

Sun Microsystems dodged a sharp sell-off on Wall Street Tuesday on optimism that the company may soon announce significant layoffs.

UBS analyst Benjamin Reitzes upgraded Sun shares Tuesday morning, saying the company could cut as many as 5,000 jobs in a major restructuring to be announced by July.

A few hours later, Sun announced plans to hold a financial update late Wednesday, raising speculation that layoff announcements might come as soon as the Wednesday night conference call.

Sun shares rose 3% Tuesday.

Google , meanwhile, lost 2.5% ahead of its conference call with investors tomorrow.

The broader market was pummeled on a number of negative developments: disappointing sales at Wal-Mart , hawkish comments from a Federal Reserve official, a downgrade of GM , falling consumer confidence and rising oil prices.

The Nasdaq fell 45 to 2164, the S&P 500 lost 20 to 1259, and the Dow tumbled 184 to 11,094. Volume rose to 2.11 billion shares on the NYSE, and 1.76 billion on the Nasdaq. Decliners led 25-7 on the NYSE, and 23-7 on the Nasdaq. Downside volume was 88% on the NYSE, and 78% on the Nasdaq. New highs-new lows were 25-129 on the NYSE, and 61-76 on the Nasdaq.

ADE soared 24% on a sweetened offer from KLA-Tencor .

CA fell 3% on a warning.

AMD lost 3.6% on concern about second-quarter results.

McAfee lost ground on news that the company dismissed its general counsel over stock option concerns.

Covad fell 11% on a warning.

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