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NEW YORK (AP) - The Dow Jones industrials plummeted nearly 375 points today after an earnings warning from Procter & Gamble unnerved investors already worried about profits at blue-chip and industrial companies. The Dow's plunge dragged the broader market lower and overshadowed the Nasdaq composite index's first foray past 5,000.
According to preliminary calculations, the Dow fell 374.47 to close at 9,796.03, its fourth-biggest one-day point drop and its lowest close since March 31, 1999. The Dow was off than 400 points in late trading before edging higher just before the close.
The Nasdaq, which had soared more than 100 points to 5,006.78 in early trading, finished lower as profit-taking and computer-driven trading that kicked in at the 5,000 mark sapped its strength.
According to preliminary calculations, the Nasdaq composite index fell 57.05 to 4,847.80 and the Standard & Poor's 500 fell 35.66 to 1,355.62.
Declining issues outnumbered advancers by a 2-to-1 margin on the New York Stock Exchange, with 2,104 down, 982 up and 422 unchanged.
NYSE volume totaled 1.30 billion shares as of 4 p.m., vs. 1.03 billion in the previous session.
The Russell 2000 index of smaller companies fell 6.20 to 595.44.
Blue-chip stocks sank after Procter & Gamble handed Wall Street analysts a dramatic profit warning for the second half of its fiscal year. The consumer goods company said earnings will fall sharply, missing analysts' expectations as well as its own estimates, because of higher costs of pulp and raw materials.
Procter & Gamble's announcement fed investor fears that other blue-chip and industrial companies might warn of similar troubles in the coming weeks. Companies are scheduled to report their first-quarter earnings next month.
Merrill Lynch downgraded the entire consumer products sector, depressing stocks including Colgate Palmolive and Kimberly Clark. Those companies have not issued any warnings about earnings.
Richard McCabe, chief market analyst at Merrill Lynch, said P&G's struggles with rising costs of materials may have sparked worries that inflation is rearing up at the most basic levels of the economy.
``Consumer goods stocks are usually defensive stocks,'' he said. ``You need their soap and shampoo no matter what the economy is doing.''
But no matter how safe sales and revenues may be, profits are sure to tumble if costs continue to escalate, McCabe said.
Procter & Gamble wasn't the only drag on the Dow. American Express and Coca-Cola also fell.
Only Exxon Mobil and Microsoft contained the Dow's losses. Exxon Mobil was the sole blue-chip beneficiary of the latest rise in oil prices, which stoked inflation fears in the rest of the group. Microsoft rose following a positive report from a Goldman Sachs analyst.
With the Dow spiraling lower, investors paid little note to the Nasdaq's first trip past 5,000. The technology-dominated index crossed 5,000 just over two months after its first close above 4,000.
In a bet that technology stocks are best prepared to thrive even if the Federal Reserve continues raising interest rates this year, investors have flocked to those shares at the expense of nearly every other corner of the market.
Even with a significant loss today, the Nasdaq is still up about 19 percent in the year to date, compared with a loss of about 16 percent for the Dow. Analysts said the Nasdaq's incredible gains have left it vulnerable to investors eager to collect some profits.
``The Nasdaq has a history of having trouble penetrating major new barriers,'' said Robert Stovall, market analyst at Prudential Securities. ``There's a strong impulse to take profits, because it seems unbelievable that this thing can keep running.''
A $21 billion merger stimulated the technology sector. VeriSign Inc., a leading provider of Internet encryption technology, is buying Network Solutions Inc., best known as a registry for domain names on the Internet. Network Solutions soared, while VeriSign fell.
The oil sector provided an exception to the weakness in old-line industrial stocks. The recent rise in oil prices, while frustrating consumers and stimulating some worries about inflation, has bumped up shares of many oil companies. Chevron and Texaco gained.
The market's weakness surprised some analysts who had expected stocks to rally on news of improved productivity by American workers. Economists consider healthy productivity gains the key to sustaining economic growth without giving rise to inflation.
``Higher productivity is an unmitigated good for the economy,'' said Stan Shipley, senior economist at Merrill Lynch, noting that the rise in productivity came along with a drop in labor costs.
``Inflation just does not emerge from that mix,'' Shipley said.