Stocks fell sharply Friday, nearly pulling the Dow Jones Industrial Average below 9,000, as the imminent conclusion to profit-reporting season left the market with fewer prospects for more record-setting gains.
The Dow slid as much as 123 points to 9,020 before reversing course and closing down 78.71 at 9,064.62. The blue-chip barometer lost 102.88 points for the week, but still holds a gain of more than 14 percent in 1998.
Broad-market indicators sank for a second straight day as investors locked in gains from the stock market's latest foray into record territory. The Dow closed at a record 9,184.94 Tuesday.
"It's the reality that our stock market got in front of itself," said Robert Froehlich, chief investment strategist for Kemper Funds in Chicago.
"Yes, we had a very strong earnings season. But the real foundation for the strength in earnings is that analysts lowered their estimates so much that it was very easy to meet or beat expectations. That realization has encouraged people to take some money off the table," he said, asserting that stocks could trade in a tight range until there's a better sense of how companies are faring.
The Standard & Poor's 500-stock index fell 11.68 to 1,107.90, and the NYSE composite index fell 6.08 to 574.47. The Nasdaq composite index, which tumbled 36 points on Thursday, fell 12.43 to 1,868.96. The Russell 2000 index of smaller companies fell 4.63 to 480.32, and the American Stock Exchange composite index fell 6.19 to 741.86.
Underscoring the growing sentiment that there's more risk than potential on the short-term horizon, J.P. Morgan recommended that its clients trim their exposure to stocks, raise some cash and shift some money to bonds.
LBS Capital Management, a Clearwater market timing company, issued a "sell" signal Friday for the Nasdaq Stock Market. The company said investors are too optimistic and cash inflows to mutual funds are off the highs recorded earlier this month. However, LBS remains positive on blue chips, saying the Standard & Poor's 500 Index is less vulnerable to a severe correction.
_ Times staff writer Helen Huntley contributed to this report.