NEW YORK, Jan 18: Investors sold off stocks on Friday, pushing the Nasdaq to its biggest percentage loss in a month as poor outlooks from Microsoft Corp. and International Business Machines Corp. sank hopes for a quick improvement in corporate profits in 2003.

Microsoft fell 7 per cent, its biggest decline since late July, after the software giant lowered its earnings forecast on Thursday. IBM fell more than 5 per cent as analysts cut their earnings estimates on worries about growth at Big Blue.

The thesis for GDP and market growth in 2003 is reliant on a pickup in capital spending, said Benjamin Pace, managing director at Deutsche Bank Private Wealth Management, with $9 billion in assets. So for Microsoft and IBM to come in and hit or exceed their earnings estimates was pretty good. But they’re not seeing any pick-up in technology spending, which was viewed as disappointing.

Other tech stocks sank on disappointing results, with chip maker Advanced Micro Devices Inc. tanking 16 per cent on a widening loss. A sluggish forecast from General Electric Co. also weighed on stocks, and the three major stock gauges ended the week lower for the first time in the new year.

The technology-laced Nasdaq Composite Index closed down 47.56 points, or 3.34 per cent, at 1,376.19, its biggest single-day fall by percentage since Dec. 9.

The Dow Jones industrial average declined 111.13 points, or 1.28 per cent, at 8,586.74 and the broader Standard & Poor’s 500 Index fell 12.82 points, or 1.4 per cent, at 901.78.

Fresh reports on Friday underscored the US economy’s fragility entering 2003 and renewed worries over its path ahead. Industrial output stumbled in December and consumers were glum in early January as worse-than-expected readings on production and consumer sentiment raised the possibility of more severe economic weakness than analysts had anticipated.

The stock market will be closed on Monday for Martin Luther King Day, and market watchers said investors were refusing to bet on stocks ahead of a long weekend.

The Nasdaq surrendered 4.9 per cent for the week, its biggest weekly decline since the first week of October, while the S&P lost 2.8 per cent and the Dow gave back 2.3 per cent.

Declining stocks eclipsed advancers by a ratio of about 2 to 1 on both the New York Stock Exchange and on Nasdaq. More than 1.35 billion shares changed hands on the Big Board and more than 1.6 billion on Nasdaq.

McDonald’s Corp. said on Thursday it would not provide quarterly earnings guidance in 2003, and Sun Microsystems Inc. said it would stop giving mid-quarter updates.

Microsoft tumbled $3.89 to $51.46. The software leader warned that revenues for the current quarter and its full fiscal year would land shy of analysts’ estimates in a persistent slump in IT spending.

IBM, a Dow member, fell $4.75 to $81.30 after analysts cut its earnings estimates for 2003. The company said after Thursday’s close that it expected to meet consensus estimates, provided there was a “modest” recovery in technology spending.

Analysts are divided on whether such a rebound will happen.—Reuters