Sun's gloomy outlook clouds Nasdaq

But the tech-heavy Nasdaq composite index remained in negative ground after bellwether Sun Microsystems delivered a downbeat outlook that dashed hopes of imminent recovery in the beleaguered sector.

Manufacturing in the Midwest expanded for the seventh straight month in August, stepping up its pace from the prior month, according to one report. Another report showed consumer sentiment dipped in August but stabilized as the stock market rebounded for most of the month, even as Americans fret about the economy's future path.

"If you look at the University of Michigan sentiment numbers or Chicago PMI numbers, they ease people's worries about the pace of the economic recovery," said Weston Boone, a trader at Legg Mason Wood Walker. "We are going into a long holiday weekend, and people like positive news."

Volumes on the last trading day of the month were thin ahead of the three-day Labor Day weekend. Wall Street is shut on Monday for the holiday.

"Whatever action we had in the market took place earlier when we got the last economic number. The data, for the most part, was reasonably in line," said Jay Finkel, a senior equity trader with Lord Abbett. "After the bond market closes early this afternoon, it will be really quiet down here."

The blue-chip Dow Jones industrial average rose 82.33 points, or 0.95 percent, to 8,753.32, having fallen before release of the data. The Dow was led up by industrials such as 3M, up $1.25 at $125.90. The broad Standard & Poor's 500 index gained 6.61 points, or 0.72 percent, at 924.41, also reversing an opening loss.

The Nasdaq composite index was down 7.74 points, or 0.58 percent, at 1,328.03, after having moved a little into the positive from early losses of about 0.80 percent.

Sun was down 7 cents, or nearly 2 percent, to $3.76 and was the most actively traded issue on Nasdaq. Sun's chief financial officer lowered the computer maker's revenue outlook for the September quarter and said corporate spending on technology may be weakening.

Other computer-related tech giants fell and were also among Nasdaq's most active issues. Web gear maker Cisco Systems was down 30 cents at $13.90, and top chipmaker Intel was off 25 cents at $16.89. Among software companies, Microsoft was off 61 cents at $49.97, and Oracle lost 29 cents at $9.67.

"The warnings are leaning on us, but not in a heavy sort of way," said Robert Basel, a Salomon Smith Barney senior trader.

Another warning came from BellSouth, the No. 3 U.S local telephone company, which said 2002 earnings will fall below expectations because of a restructuring and weak sales in its wireless business, as well as the turbulent economy.

Shares of BellSouth lost $1.30 at $22.95, or 5 percent. SBC Communication, BellSouth's partner in the wireless joint venture Cingular Wireless, saw its stock drop $1.00, or nearly 4 percent, to $24.80, pressuring the Dow index.

BellSouth's warning comes only five weeks after the company last revised its outlook on July 22, "apparently highlighting the speed at which business conditions have apparently deteriorated," Merrill Lynch analyst Adam Quinton said.

In the news, Major League Baseball players reached a new labor agreement with team owners in 11th-hour talks, averting a strike just ahead of the deadline, said Donald Fehr, chief of the players' union.

After the open, the University of Michigan's final August consumer sentiment index fell slightly to 87.6, down from 88.1 in July and a mid-month reading of 87.9, market sources said Friday. That was below expectations for a rise to 88.3.

On a more upbeat note, the National Association of Purchasing Management-Chicago index rose to 54.9 in August from 51.5 in July. It was the seventh consecutive reading above 50, which points to an expanding regional manufacturing economy. A reading below 50 signals contraction.

Federal Reserve Chairman Alan Greenspan gave no hints about the Fed's near-term outlook for policy in his remarks at the Federal Bank of Kansas City's annual economic symposium in Jackson Hole, Wyo.

Greenspan said there was little the Fed could do to identify and combat emerging asset bubbles, such as the stock market run-up in the late 1990s.

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