Stocks Hit by Profit Taking

Economic concerns also weighed down the major indexes ahead of Friday's crucial employment report

Profit taking and concerns over economic conditions affecting the consumer resulted in stocks giving back some of their recent games. Technology issues led the way throughout the session, which saw the Dow Jones Industrial average pare its losses somewhat. Investors are taking profits following a recent run-up that has many questioning whether market and economic fundamentals have improved enough to justify those gains.

Volume was active with 1.1 billion shares changing hands on the New York Stock Exchange where decliners are lead advancers nearly 2-1 throughout the day. On the Nasdaq, 1.98 billion shares traded where decliners were also ahead by a margin of nearly 2-1.

The market was due for a pullback, according to Larry Rice, chief investment officer, Josephthal & Co. "We were very overbought and this is the 'pause that refreshes'," he says. Rice expects to see the sell-offs continue until there are signs of a bottoming of the economy and stability when he expects the market will turn up again. Other catalysts for upward momentum should be tax cuts from the Bush Administration, the cumulative effect of interest rate cuts and increases in money supply numbers. Rice expects these things will combine to improve market conditions, but not until the fourth quarter.

Barry Hyman, market strategist for Ehrenkrantz, King Nussbaum notes that there wasn't any real significant fundamental news this morning, with the normal number of earnings misses. "I think what happened in the last few days is too much enthusiasm and too much speculation came back into the market," he says.

The Dow Jones Industrial Average gave up 80.10 points, or 0.74%, to 10796.58. The Nasdaq Composite index lost 74.46 points, or 3.35%, to close at 2146.14. Meanwhile, the broader S&P 500 shed 18.85 points, or 1.49%, to 1248.58.

Tomorrow's Employment Report will be closely scrutinized and could provide direction for stocks heading into the May 15 FOMC meeting. Standard & Poor's MMS expects nonfarm payrolls to rise 25,000 in April, and the unemployment rate to climb to 4.4% from 4.3%. This data will likely set the tone for Friday's session.

Among today's stocks in the news, Macromedia (MACR ) posted $0.15 vs. $0.30 Q4 EPS (pro forma) despite a 3% revenue rise. The Web software firm says the economic climate has significantly reduced visibility; therefore, it will not provide near term guidance.

Treasury Markets

Treasuries ended the day higher. A string of sour data boosted bonds nearly a point and left equities hemorrhaging in front of key payrolls data Friday morning.

World Markets

In London, the Financial Times 100 closed down 140.30, or 2.38%, to 5763.90. Germany's DAX Index lost down 111.00, or 1.79%, to close at 6102.84. In France, the CAC 40 ended down 112.04, or 2.01%, to 5460.87.

Japan's equity markets were closed in observance of Constitutional Memorial Day. The markets will also be closed on Friday. In Hong Kong, the Hang Seng shed 96.10, or 0.70% to finish the session at 13718.14.

By Alan Hughes in New York

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