Wall Street: Thursday close

MORE signs that America's giant economy is sinking back toward recession at the same time as the White House is preparing for war sapped enthusiasm behind Wednesday's sharp rally.

The Dow Jones Industrial Average gave up all of the 117 points it gained on Wednesday and then some, sinking 141.42 points or 1.7% to 8283.70. The Nasdaq was down 41.28 points or 3.2% to 1251.03 as techs were battered on profit jitters.

The economic figure which caught economists' attention was the Institute of Supply Management's survey of the services sector, which represents roughly 80% of the US economy. The ISM said its survey fell back to 50.9 last month from 53.1 in July and far below the 54 expected by a consensus of economists. It was the lowest level for the index since January.

Monthly retail chain store sales also pointed toward a slow-down. Wal-Mart, the world's biggest retailer, reported that sales at its stores opened for more than a year rose just 3.8% in the past month, shy of expectations and down sharply from increases a year ago. Wal-Mart shares dropped $1.40 or 2.7% to $50.94. Federated Department Stores shed 21 cents or 0.6% to $35.30.

The figures prompted one economist to observe that the economy had hit 'a soft patch' in August and that could be confirmed by the August unemployment report due out before the opening of trading today (Friday).

Concerns that economic activity could slow before next Wednesday's anniversary of the terror attacks on Washington and New York also played into anxiety, as did more war talk from the Bush Administration as it strives to justify an attack on Iraq to the world community.

Intel, down 11% so far this week, slumped $1 or 6.2% to $15.11, but traded at $15.61 after releasing a mid-quarter update calling for revenues at the low end of its previous range. Other techs wilted along with the chipmakers.

IBM sagged $1.55 or 2.1% to $72.18. Microsoft slid $2.30 or 4.8% to $45.91.

The financial services sector weakened as the inquiry into allocating shares to favorite clients widened. Goldman Sachs was marked down $2.61 or 3.5% to $72.89 after it was reported that it had been asked for documents related to initial public share offerings. Citigroup came off $1 or 3.3% to $29.30.