Stocks opened lower Friday after weak results from Dell and a jump in oil prices.
Light, sweet crude rose nearly $3 a barrel, topping $118 a barrel, as Tropical Storm Gustav threatened supplies in the Gulf Coast.
Dell put pressure on the tech sector after releasing disappointing quarterly numbers after the bell Thursday. Analysts said Dell just cut prices too much in an attempt to grab -- or buy -- more market share. Dell's comment that spending cutbacks on information technology have spread from the U.S. to Western Europe and Asia rippled through the sector.
Chip makers also were also under pressure after chip maker Marvell Technology beat earnings expectations but delivered a tepid outlook for the third quarter. Marvell chips are used in Apple's iPhone and Research In Motion's BlackBerry devices.
Shares of Novell bucked the tech trend after the business software maker topped forecasts, boosted by a jump in sales of Linux software, and raised its outlook for 2008. Novell is the world's second-largest seller of Linux software after Red Hat .
The market was all abuzz about Lehman Brothers , with analysts noting that a long, three-day weekend would be a perfect time for a buyer to sweep in and take over Lehman.
Shares of Fannie Mae and Freddie Mac took a breather after a dizzying ascent in the past week that saw Fannie up 80 percent at Thursday's close from its intraday low of $4.40 last Friday and Freddie Mac double in that time period from its low of $2.50 that day.
In economic news, consumer sentiment hit a five-month high. The University of Michigan's gauge of the consumer mood jumped to 63 in August, up more than two points from the mid-month and July readings, and its highest since March.
Personal income fell 0.7 percent, the Commerce Department reported, when economists had expected it to be flat. Spending ticked up 0.2 percent, as expected. The personal-consumption-expenditures index, a gauge of inflation, rose 4.5 percent, the steepest since February 1991. Excluding volatile food and energy costs, the core PCE rose 2.4 percent, the biggest jump since February 2007.
The Institute for Supply Management's Chicago business barometer jumped to 57.9 in August from 50.8 in July -- economists had expected a reading of 50, right on the line between contraction and expansion.
Asian markets rallied, with Japan up more than 2 percent, led by industrial companies and exporters. But European shares failed to find direction, with weakness in banks and pharmaceutical companies offsetting strength in the retail sector.
U.S. markets will be closed for trading on Monday for Labor Day and the bond market will close early at 2 pm New York time Friday.
MONDAY-THURSDAY: Democratic National Convention in Denver
FRIDAY: Personal income and spending; Chicago manuf. report; consumer sentiment; farm prices
WATCHERS: McCain VP announcement
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