(Updates to early afternoon, new byline)
By Haitham Haddadin
NEW YORK, March 19 (Reuters) - Stocks were down slightly on Wednesday as a deadline for war loomed only hours away after a five-day rally in the blue-chip Dow, while technology issues were dented by news of softer software sales from Oracle Corp.
"It's remarkable that we have held on to most of the gains from the recent rally," said Al Kugel, senior investment strategist Stein Roe Investment Counsel. "After five days of gains some profit taking is expected. I'm surprised it did not happen yesterday."
War could be only hours away as U.S.-led forces moved units into position for a war to oust Iraqi President Saddam Hussein. U.S. President George W. Bush said his forces will invade if Saddam does not flee by 8 p.m. Wednesday evening, Washington time, which is 4 a.m. Thursday in Iraq (0100 GMT).
"There's no impetus behind the selling today, there's no big volume," Kugel said. "The main thing is the deadline that the president gave to Saddam Hussein runs out this evening and after that action will take place. I think it will be tomorrow night."
The broad Standard and Poor's 500 index was down 2.09 points, or 0.24 percent, at 864.36, having earlier fallen a few points to a session low of 861.21. Likewise, the blue-chip Dow Jones industrial average 22.34 points, or 0.27 percent, at 8,171.89, up from a session low of 8,141.50.
The tech-laced Nasdaq Composite Index lost 17.26 points, or 1.23 percent, at 1,383.29.
Oracle, the world's No. 2 software maker, sank 8.6 percent, raising worries about the corporate outlook with war around the corner and the U.S. economic rebound looking sluggish. Oracle's key software sales fell short of expectations, and the company offered a murky outlook.
Oracle fell $1.05 to $11.20 and dragged on the business software sector. Oracle said quarterly revenues may range from down 6 percent to up 2 percent due to the war threat and rising energy prices.
The Goldman Sachs software index lost 3.6 percent, reflecting losses in issues such as PeopleSoft Inc. , off $1.48 to $16.77, and Siebel Systems Inc. , down 54 cents to $8.78.
Tobacco shares bounced back after a beating on Tuesday amid renewed talk of the U.S. Justice Department's case against the industry, in which it said the United States is entitled to $289 billion in forfeited profits from cigarette makers.
Morgan Stanley raised its investment rating for the tobacco industry to attractive from in-line, saying "capital markets are now pricing into the sector a 'worst-worst' case with respect to litigation and fundamentals."
Altria Group Inc. , parent of Philip Morris USA, rose $1.30, or 4 percent, to $33.90. R.J. Reynolds Tobacco Holdings Inc. rose $1.24, or more than 3 percent, to $34.81.
Semiconductor manufacturer Microchip Technology Inc. tumbled $2.72, or more than 11 percent, to $21.02. The company cut its fourth-quarter revenue and earnings guidance, saying sales have slowed because of U.S. preparations for a war with Iraq and tensions with North Korea.
The Philadelphia Stock Exchange semiconductor index slumped 2.45 percent. Intel Corp. , the top chip maker, lost 36 cents, or 2 percent, to $17.89.
Corning Inc. jumped 25 cents to $6.25 after the No. 1 maker of fiber-optic cable reiterated that it expects sales at its liquid crystal display glass business to grow 20 percent to 40 percent annually through 2006.
American Healthways Inc. was up $1.62, or 9.2 percent, at $19.17. American Healthways, which runs managed health care programs for patients with chronic ailments, on Tuesday posted second-quarter net income that beat expectations due to expansion of its care enhancement business and health-plan incentive bonuses.