Stocks held back by tech sector

Stocks fell Friday led by a slump in technology stocks. Microsoft fell the most in more than four years after the company wrote off nearly $1 billion on its new tablet computer and reported declining revenue for its Windows operating system. 

A bad day for technology stocks Friday held back the stock market's big run-up.

Microsoft led the slump in tech, falling the most in more than four years after the company wrote off nearly $1 billion on its new tablet computer and reported declining revenue for its Windows operating system. Google dropped after its revenue fell below analysts' forecasts, partly because the Internet search leader's ad prices took an unexpected turn lower.

With tech stocks falling, the Standard & Poor's 500 index was held to a gain of 2.72 points, or 0.2 percent. That pushed the index up to another all-time of 1,692.09. The S&P 500 has rebounded from a poor performance last month and is up 5.3 percent in July.

Despite the market's broad advance this month, a growing list of poor tech results is raising concerns about the strength of the economy and the stock market. Intel and eBay also reported weak results this week, and chipmaker Advanced Micro reported a second-quarter loss because of a worldwide slump in PC demand.

Technology "has definitely been a sector that people have been expecting big things from and it has not delivered," said Randy Frederick, Managing Director of Active Trading & Derivatives at the Schwab Center for Financial Research.

The Dow Jones industrial average closed down 4.80 points, or 0.03 percent, to 15,543.71. If not for the declines in Microsoft, Hewlett-Packard and IBM, the index would have gained about 70 points.

A brighter outlook on the U.S. economy from industry bellwether General Electric was also overshadowed by the slump in tech.

The technology-heavy Nasdaq composite fell 23.66 points, or 0.7 percent, to 3,587.61. The index was the only major market benchmark to end the week lower, falling 0.4 percent.

Technology stocks in the S&P 500 have lagged the S&P 500 this year, gaining only 8.5 percent, versus 18.6 percent for the broader index. The industry is one of four of the 10 sectors in the S&P 500 that are expected to see earnings growth contract in the second quarter.

So far, 104 companies from the S&P 500 have reported earnings. Two-thirds of them have beaten analysts' expectations, according to S&P Capital IQ data. Just under half have exceeded analysts' forecast for revenue.

Microsoft dropped $4.04, or 11.4 percent, to $31.40 after reporting its earnings late Thursday. That's the biggest one-day decline since the stock slumped 11.7 percent in January 2009. Google fell $14.08, or 1.5 percent, $896.60. It also posted earnings late Thursday.

The stock market rose sharply in July after the Federal Reserve reassured investors that it won't pull back on its economic stimulus before the economy is strong enough. The U.S. central bank is currently buying $85 billion in bonds every month to keep long-term interest rates low and to encourage borrowing and hiring.

In government bond trading, the yield on the 10-year Treasury note fell to 2.48 percent from 2.53 percent late Thursday. Ten-year Treasurys have risen, pushing their yield lower, since July 5, when the government reported strong hiring in June. The yield rose as high as 2.74 percent that day.

The pullback in bond yields should help stocks sustain their rally because it makes them look more attractive compared to bonds, said Paul Zemsky, head of multi-asset strategies for ING U.S. Investment Management. Lower interest rates should also support the housing market by holding down mortgage rates.

"A lot of the fears that had come from these higher rates are abating," Zemsky said. "Rates have come back down and that's good."

The price of crude oil edged up a penny to $108.05 a barrel. The price of gold climbed $8.70 to $1,292.90 an ounce.

Among other stocks making big moves:

— General Electric rose $1.09, or 4.6 percent, to $24.72 after posting a slight gain in net income in the second quarter. GE also said its U.S. operations are picking up steam. The results were better than analysts had forecast.

— Chipotle Mexican Grill climbed $32.22, or 8.6 percent, to $408.90 after the Mexican fast-food chain reported results that beat analysts' expectations.

— Whirlpool surged $9.54, or 8 percent, $128.91 after its second-quarter net income soared 75 percent as demand improved for its appliances. Whirlpool also benefited from some tax credits.