Wall Street shares Close sharply lower on profit-taking, political worries

NEW YORK (AFX) - Share prices closed sharply lower, pressured by profit-taking on recent steep gains and concerns about the balance of political power in Washington in the wake of reports that Vermont Republican 

Senator James Jeffords may switch his party affiliation, dealers said. 

At the 4.00 pm close, the DJIA was down 149.8 points at 11,107.3 and the S&P 500 down 19.99 at 1,289.39.

The Nasdaq composite was down 70.06 at 2,243.79, marking the first lower closing level in seven sessions.

Dealers said stocks were weaker throughout most of the session on profit-taking after recent gains and concerns that in recent days prices have risen excessively.

Prudential Securities equities strategist Brian Piskerowski said that the market was further pressured by an Associated Press Report that Jeffords is poised either to transfer to the Democratic or Independent party. 

If Jeffords indeed makes such a switch, the Republicans would lose their slight power edge in the U.S. Senate, and proposed Republican programs would be placed in jeopardy.

UBS Warburg trader Art Cashin said the possible affiliation change by Jeffords upset market players because a change in Washington's political balance also could lead to an altered legislative environment for stocks in 

the defense, healthcare, and telecommunications group.

In addition, other dealers noted that the market generally abhors political uncertainty. 

The technology sector was pressured by yesterday's news that in April the semiconductor industry's book-to-bill ratio fell to 0.42, the worst level in 10 years.

The latest survey results sparked heavy selling in the semiconductor group, causing Applied Materials to close down 3.65 usd at 52.94 Texas Instruments down 1.73 at 39.58 and Intel down 73 cents at 28.80 usd. 

Dell closed up 1.04 usd at 26.98, benefiting from a positive research note from Goldman Sachs which added the issue to the 'recommended list'.

The automotive sector closed lower under continued pressure from problems with Ford's Explorer model and defective Bridgestone/Firestone tires. Bridgestone earlier announced the end of its business relationship with Ford as the automaker said it would embark on a massive tire replacement program.

Ford closed down 19 cents at 25.79 usd and GM down 1.71 usd at 55.18.

Goodyear finished down 90 cents at 29.50 usd, after failing to profit from expected market share gains from Firestone.

Legal issues between Wachovia, SunTrust and First Union are keeping the banking sector in focus.

Wachovia closed down 52 cents at 65.18 usd after calling on SunTrust, which closed down 71 cents at 61.13, to abandon its hostile takeover efforts. 

Wachovia previously accepted a lower friendly takeover from First Union, which closed down 21 cents at 31.49 usd.

Among brokerages, Goldman Sachs ended down 3.99 usd at 99.30, following reports that the company is laying off 12 pct of its worldwide investment banking staff due to current market conditions.

Fannie Mae closed up 3.45 at 79.81 and Freddie Mac up 2.75 at 65.18 after a Congressional Budget Office study confirmed that they will be allowed to retain 3.9 bln usd in U.S. subsidies. 

Alcatel's ADRs closed down 2.05 at 29.59 and Lucent down 24 cents at 9.66, remaining in focus following reports that the two companies have decided to push ahead with merger talks.

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