Wall Street report: Friday close

MARKETS dropped on 'good news is bad news' data suggesting that the US economy might not be strong enough to boost profits. The Dow Jones Industrial Average slid 97.50 points or 0.97% to 9,939.92. The Nasdaq Index tumbled 49.64 points or 3.01% to 1,600.85, erasing all of Wednesday's gains to close the week down 0.8%. The Dow lost 0.7% on the week.

Washington handed markets what was initially considered good news when it reported that the producer price inflation index fell 0.2% in April, while most economists were expecting it to jump 0.4%. The drop was due mostly to falling food prices. But, on second take, economists were not sure the numbers were friendly to investors hoping for a rebound in profits.

'This could be interpreted as evidence of a still soft, sluggish economy,' said John Lonski, economist at Moody's Investors Service. The fear is that falling prices will erode profits in an economy that appears to have levelled off after emerging quite strongly from recession earlier this year.

Markets have been see-sawing this year on fluctuating expectations of a recovery in profits. Pessimists have had their way in the past few weeks as economic data and company reports suggest that pricing power remains limited. Many companies are having to rely on cost-cutting rather than price rises to maintain profitability.

Another indication that the operating environment remains challenging came from IBM, as it prepared to lop as many as 8,000 jobs or 2.5% of its workforce. IBM shares were off fractionally at $79.68.

WorldCom offered more evidence that the capital expenditure boom provided by expanding telecoms in the late 90's was well and truly over. WorldCom shares stumbled another 41 cents or 20% to $1.60 as rating agencies cut its borrowings to 'junk' status. Telecoms generally were weak with SBC off 90 cents or 2.9% to $30.45.

Accounting questions arose anew, this time involving aircraft maker Boeing. The company denied that it had improperly accounted for production problems in 1997, but its shares were marked down $1.35 or 3% to $43.63.

Cooper Tire & Rubber shed $2.82 or 11% to $22.85 on allegations that employees had shredded documents related to a tyre safety court case.

Techs weakened as the day wore on. Microsoft was off $2.07 or 4% to $50.05 and Intel gave up $1.23 or 4.4% to $27.01. Sun Microsystems came off another 41 cents or 6.2% to $6.15.

Airlines nosedived after US Airways said it might have to file for bankruptcy. Shares in US airways skidded $1.35 or 27% to $9.50. UAL, parent of United Airlines, surrendered $2 or 17% to $9.50.

Among Dow components, heavy equipment maker Caterpillar eased $1.05 or 2% to $52.81, Walt Disney eased 40 cents or 1.7% to $23.15 and General Electric was marked down 84 cents or 2.7% to $30.65.