NEW YORK, May 11: Stocks skidded on Friday to finish the week at a loss despite the monster rally two days earlier, as mounting debt at telecom companies like WorldCom exacerbated investor fears over the ailing health of Corporate America.

People are intimidated that they are unable to guess this market, said Stanley Nabi, managing director at Credit Suisse Asset Management, which oversees $269 million worldwide.

Whether you are a professional or trader or speculator you have egg on your face. There is fear of a liquidity crisis at telecoms, fear of a weak dollar, fear of higher interest rates, fear over more confrontation in the Middle East.

Investors, bruised by weeks of selling, for the second day locked in gains from the hefty rally on Wednesday which had lifted the technology-rich Nasdaq almost 8 per cent.

Technology shares led the drop as the euphoria over better earnings from Web gear giant Cisco Systems Inc. fizzled out. Telecom stocks bore the brunt of the selling after WorldCom’s credit rating was slashed to “junk” status.

There are unrealized hopes and expectations, said John Davidson, president and chief executive at PartnerRe Asset Management, which oversees $4.5 billion. In reality, the economic situation hasn’t changed with the forecast of one big company. Wednesday’s rally didn’t change the landscape.

The Nasdaq Composite Index fell 49.64 points, or 3.01 per cent, to 1,600.85, according to the latest available numbers. The blue-chip Dow Jones industrial average lost 97.50 points, or 0.97 per cent, to 9,939.92. The broader Standard & Poor’s 500 Index dropped 18.02 points, or 1.68 per cent, to 1,054.99.

Losers trounced winners by a ratio of about 2 to 1 on the New York Stock Exchange and 11 to 6 on Nasdaq. More than 1.18 billion shares changed hands on the Big Board and more than 1.83 billion on Nasdaq in moderate trading.

For the week, the Nasdaq shed 0.75 per cent, the Dow lost 0.67 per cent and the S&P 500 fell 1.7 per cent.

The mood is very downcast right now and people are just really skeptical on stocks, said Brian Pears, head of equity trading at Victory Capital Management. They are getting disappointed with the fact that Wednesday didn’t mean so much.

Technology bellwether International Business Machines Corp. heightened fears tech spending will remain sluggish. Big Blue is poised to make its biggest job cuts in a decade, up to 9,500 positions, a source close to the situation told Reuters. The Dow component eased 25 cents to $79.68.

People were very nervous when they heard that potentially IBM was going to lay people off, said Mark Donahoe, managing director of institutional sales trading at US Bancorp Piper Jaffray. The reality is we’re not going to have as strong a recovery as some people thought.

Old Economy stocks such as fast-food giant McDonald’s Corp. and drug heavyweight Johnson & Johnson helped support the blue-chip Dow on hopes these companies can offer more stable quarterly profits. McDonald’s rose 53 cents to $29.81, while Johnson & Johnson advanced 48 cents, to $61.85.

There are clearly a lot of issues in tech and telecom, from an earnings, balance sheet and credibility standpoint, said Mark Foster, chief investment officer at Kirr, Marbach & Co., which oversees $450 million. Better valuations and better earnings growth are making blue-chip shares more attractive, he said.

Oil stocks emerged as winners during a downbeat session. Oil prices rose as Middle East tensions kept traders on their toes for the possibility of another flare-up over the weekend.—Reuters