Profit-taking sends markets down

NEW YORK – Investors dumped stocks and locked in profits Friday after the glow of a week full of strong earnings reports faded.

The retreat came as cautious forecasts from railroads caused unease about the economy and a rising dollar pushed prices of commodities lower, which hurt materials and energy stocks. The Dow Jones industrial average fell 109 points to end the week with a modest loss.

Traders appeared eager to collect gains after earnings reports for the July-September quarter came in far stronger than forecast, which had pushed stock indexes up more than 6 percent in the three weeks leading into Friday.

Analysts have been calling for stocks to take more breaks after a seven-month rally that raised questions about whether the market was getting ahead of itself. The Standard & Poor’s 500 index is up 59.6 percent since March, though it’s still down 31 percent from its peak two years ago.

The day’s drop came despite some pieces of good news. The National Association of Realtors reported that existing home sales posted their biggest increase in 26 years in September, while shares of Amazon.com rode to a new high after the Internet retailer’s earnings and forecasts came in much stronger than expected. Amazon’s gains as well as a jump in Microsoft Corp. after its own strong earnings helped limit the losses of the technology-heavy Nasdaq composite index.

However, the strong results from Amazon and Microsoft couldn’t erase concerns over a poor outlook and sharp profit drop from chipmaker Broadcom Corp. or the pessimistic forecasts from railroad CEOs.

Union Pacific CEO Jim Young said he expects the economy to “limp along” until unemployment starts to fall, while Burlington Northern also issued a tepid forecast. Railroads are seen as an early indicator of economic activity because of the key role they play in shipping goods to manufacturers and markets.