NEW YORK -- The Nasdaq composite index tumbled again yesterday, bringing the fall from its record to 19.7 percent, as investors continued to flee technology stocks that are expensive relative to earnings, including Cisco Systems Inc. and JDS Uniphase Corp.
The Dow Jones industrial average rallied as investors snapped up cheaper industrial and consumer shares, including Alcoa Inc. and Minnesota Mining and Manufacturing Co. International Paper Co. rose after it reported profit that beat expectations.
"This is a flight to the sales rack," said David Sowerby, who helps oversee $8 billion at Loomis Sayles & Co. in Bloomfield Hills, Mich. "Investors are looking for stocks that have lower average P/Es and have a quality earnings history as well."
The Nasdaq dropped 132.30, or 3.16 percent, to 4,055.90, extending Monday's 5.8 percent plunge. A warning from Motorola Inc., which is not in the index, that second-quarter earnings will fall short of analysts' forecasts sparked a sell off in computer and telecommunications shares.
The Dow rose 100.52 to 11,287.08, adding to a 75-point gain Monday. Dow stocks trade at 26 times recent earnings; Nasdaq stocks trade at 189 times profit.
The Standard & Poor's 500 index fell 3.87 yesterday to 1,500.59.
Yesterday's drop leaves the Nasdaq down 0.3 percent for the year, while the Dow's rally pared its loss to 1.8 percent. Only the S&P 500 is up for the year, with a gain of 2.1 percent.
Since the Nasdaq peaked March 10, investors have shifted money out of technology and biotechnology shares and into industries that have trailed many high-flying technology stocks for the past year or more.
A Merrill Lynch & Co. survey showed money managers worldwide plan to reduce holdings in technology, media and telecommunications stocks and raise investments in banking and pharmaceutical shares. The proportion of fund managers positive about technology stocks has fallen to 12.5 percent from 21.5 percent last month.
Elsewhere on the broad market, the Russell 2000 index, a benchmark of small-cap stocks, dropped 8.53 to 510.13; the Wilshire 5000 index slumped 110.53 to 13,972.61; the American Stock Exchange composite index skidded 13.17 to 944.87; and the S&P 400 midcap index slipped 0.48 to 475.04. The New York Stock Exchange composite index climbed 1.49 to 661.20.
The Sun-Bloomberg Maryland index of the top 100 Maryland stocks lost 9.58 to 247.01, led by Aether Systems Inc., which dropped $18.25 to $138.50, and MedImmune Inc., which sank $12.8125 to $155.6875.
Motorola dropped $27 to $124 after the company forecast second-quarter profit of 67 cents a share, lower than the 70-cent average estimate. The company told analysts and investors in a conference call that its goal of 10 percent operating margins in the division that includes cellular phones is "at risk."
Cisco fell $2.5625 to $70, and JDS Uniphase, the biggest maker of parts for fiber-optics equipment, shed $7.9375 to $102.1875.
Cree Inc. fell $10.75 to $105.75 after the manufacturer of semiconductor materials said it agreed to buy closely held Nitres Inc., a designer of nitride-based semiconductor devices, for about 1.5 million shares.
Cypress Semiconductor Corp. rose 75 cents to $52.75. The company's stock had gained 73 percent this year through Monday. It said it expected earnings to reach 39 cents to 41 cents a share.
General Electric Co. rose $1.3125 to $161.375. Analysts expect the company's profit to rise 18 percent to 77 cents a share for the first quarter. Analysts revised their estimates last month after the company, whose stock has risen 5.4 percent this year, said it would beat then-current estimates of 75 cents.
International Paper rose 56.25 cents to $43.1875 after beating analysts' estimates for the first quarter. The company's shares have fallen 22 percent year-to-date.
DuPont Co. rose $1.50 to $59. The chemical maker's stock has fallen 15 percent since January, even after gaining 30 percent in the past month.
Honeywell International Inc. gained $2.5625 to $56.0625, 3M rose $2.6875 to $95.4375, and Alcoa Inc. advanced $2.6875 to $70.375.
Biogen Inc. slid $12 to $53 after its first-quarter profit missed forecasts. The biotechnology company reported first-quarter profit from operations of 41 cents a share, below the 43-cent average estimate of analysts. The stock has fallen 23 percent this year.
ViroPharma Inc. plunged $48.50, or 68 percent, to $23.25 after the drugmaker said its experimental cold and meningitis medicine pleconaril had only a "modest effect in reducing duration" of the common cold, and it did not have significant results for children. Analyst Franklin Berger from J. P. Morgan Securities lowered his recommendation on the stock to "market perform" from "buy."
PE Corp.'s Celera Genomics Group fell $11.125 to $88.875. The stock fell 20 percent Monday as the scientist running a rival project to decode human DNA questioned Celera's thoroughness.
Exelixis Inc., a biotechnology company, rose $2.1875 to $15.1875 in its first day of trading. The maker of a system to analyze genes sold 9.1 million shares in an initial stock sale priced at $13, raising $118.3 million.