--DJIA down 80; Nasdaq down 74; S&P 500 down 18
--Most sectors lower; tobacco eke out gains

By Rebecca Byrne New York, May 3 (BridgeNews) - U.S. stocks tumbled Thursday as investors took some money off the table following an impressive rally recently and ahead of the key employment report due out on Friday. The Nasdaq closed down 74.40, or 3.35%, to 2146.20. The Dow was down 80.03, or 0.74%, to 10,796.65 and the S&P 500 was down 18.85, or 1.49%, to 1248.58.
* * * "The market has had a great run up and was entitled to a fill-in day so you can't read too much into it," said Mace Blicksilver, managing director at Marblehead Asset Management.
The S&P 500 has risen 15% from its low while the Dow is up 18% and the Nasdaq has climbed 31% from its April 4 low.
In fact, the Nasdaq rose 9% over the last four trading days alone, with Internet and networking stocks up about 18% and semiconductor stocks up almost 10%.
"We're on the road to recovery but it's a long slow pull and this is just one bad day," said John Forelli, senior vice president at Independent Investment Associates. "It's a pattern we'll probably see more of in the weeks ahead; a few good days followed by ugly ones."
Concerns that the economy may not be as strong as initially thought also weighed on the market Thursday. New claims for U.S. state unemployment insurance benefits rose 9,000 to 421,000 during the week ended Saturday -- the highest level in more than five years. Meanwhile, layoffs rose 2% to 165,564 in April -- the highest monthly level on record.
"There's also some nervousness ahead of the employment report," Blicksilver said.
The April employment report is expected to show an uptick in unemployment to 4.4%, with non-farm payrolls up 50,000. Technology stocks were particularly weak Thursday, with networkers down 5%, Internet stocks down 4% and chip and hardware issues down 3%. Vitesse Semiconductor (VTSS) was a big loser in the chip sector, falling 9% to 34.39 after saying it would cut 12% of its workf orce and expects a one-time charge of between $1.5 million and $2.0 million in the third quarter. Tucker Anthony downgraded Applied Materials (AMAT), Novellus (NVLS) and several other chip equipment stocks saying investors do not fully appreciate the potential slump in orders, revenues and earnings and that share prices could decline "significantly."
Software issues also pulled back even though Goldman Sachs analyst Rick Sherlund said he is "more constructive on the group than are many of our analysts covering other segments of the tech sector. "Software is not subject to the need to work down channel inventory levels and is sold more for current consumption, so business could potentially come back more quickly than in other sectors," Sherlund said in a research note.
On the Dow, Intel (INTC) fell almost 5% while Hewlett-Packard (HWP) lost almost 4%. Merrill Lynch said it did not hear anything new about H-P's strategy or outlook in a technology conference Thursday and is therefore reiterating its cautious stance. Meanwhile, UBS Warburg lowered its rating on Dell Computer (DELL) based on "more aggressive price setting." Instead of buying PC stocks, UBS recommended buying Microsoft (MSFT). Philip Morris (MO), Citigroup (C) and 3 M (MMM) led t the Dow on the upside.
In the broader market, drug, oil and retail stocks all pulled back while a few financial and tobacco stocks advanced. Volume on the Big Board hit 1.10 billion shares with declines beating advances by 9 to 6. On the Nasdaq, volume hit 1.99 billion shares with winners beating losers by 23-to-14.
In the bond market, the 30-year Treasury rose 29/32, pushing its yield down to 5.636%. Meanwhile, NYMEX June crude oil futures rose 65 cents to $28.45 a barrel. In currency trade, the euro fell against the dollar to 89.01 cents. The dollar fell against the yen to 121.33.