Stocks declined Wednesday, led by tech issues after an analyst
cut revenue forecasts for chip giant Intel (INTC). This raised already heightened fears about the upcoming preannouncement season. Concern about valuations and rising interest rates in coming months, after the Federal Reserve adopted a neutral stance on Tuesday, also weighed on the market.
The Dow Jones industrial average lost 133.70 points, or 1.26%, to 10,501.57. The Nasdaq Composite Index fell 48 points, or 2.55%, to 1,832.87. The broader Standard & Poor's 500 Index declined 18.44 points, or 1.58%, to 1,151.85.
Tech stocks-- namely the semiconductor, biotech and Internet groups-- dragged the market lower. Intel shares declined after Salomon Smith Barney analyst Jonathan Joseph says the company could post a modest seasonal decline in second quarter revenues, in line with the 5-year average of about a 3% decline from the first quarter. Price cuts on Intel's Pentium 4 processor may also hurt sales. The analyst cut earnings and revenue forecasts for the chipmaker.
Dow component General Electric (GE) shares fell after influential bond fund manager Bill Gross of Pacific Investment Management Company said his funds would not buy any GE commercial paper in the foreseeable future. Gross criticized GE Capital for issuing $11 billion in medium-term and long-term debt last week, and then disclosing on Monday that it filed for a $50 billion shelf registration with the SEC.
One of the big losers was Mercury Computer Systems (MRCY) after it slashed third quarter earnings guidance, citing delays in shipments to defense industry.
Red Hat (RHAT) shares skidded after the provider of Linux software and services reported fourth quarter earnings from continuing operations of $0.01, below expectations.
Besides tech, auto-related stocks declined after JP Morgan downgraded Goodyear Tire & Rubber (GT) to market perform from long term buy. Airline stocks also skidded amid more negative news in the group.
And pharmaceuticals were under pressure after Bristol-Myers (BMY) shares, which were halted earlier, fell sharply after the company said a study showed that safety profiles of its experimental hypertension drug Vanlev and rival compound enalapril were similar, except for a higher risk of angioedema observed in Vanlev-treated patients. DB Alex. Brown and Merrill Lynch downgraded the shares.
However, leisure stocks were higher after Six Flags (PKS) reported better-than-expected fourth quarter results. Goldman upgraded the stock to trading buy.
In acquisition news, Compaq (CPQ) shareholders approved the bid from Hewlett-Packard (HWP) today. On Tuesday, Hewlett-Packard's board announced that based on a preliminary estimate provided by its proxy solicitor, it believes it has enough shareholder votes to approve the computer maker's $20.8 billion offer for Compaq.
Also, General Electric says it has not made an offer to buy Tyco International's (TYC) CIT Group finance unit and is not pursuing a deal, countering earlier press reports.
U.S. Treasuries closed lower, as bond investors had second thoughts about the Fed's rotation to neutrality Wednesday, and suffered from rumors about the Fed pulling the trigger on a half-point rate hike as soon as May, says S&P MMS. Strong housing data didn't help either.
In economic news Wednesday, housing starts climbed 2.8% in February to 1.769 million, and January numbers were revised up to 1.721 million from 1.678 million previously. That's the highest rate since December, 1998, and the fastest pace since December, 1978, and much higher than economists' forecasts. Permits were up 1.8% to 1.752 million, from a revised 1.721 million. Housing completions rose 5.1% to 1.680 million. These numbers add to the tally of strong data and may limit gains in Treasuries, says S&P MMS.
On Thursday, traders will watch reports on February CPI, leading economic indicators, the March Philadelphia Fed index, and weekly jobless claims.
European stock markets were lower. In London, the Financial Times-Stock Exchange 100 index finished down 49.20 points, or 0.93%, to 5,266.90, even though the U.K. unemployment rate fell to a 26-year low of 3.1% in February from 3.2% in January.
In France, the CAC 40 ended with a loss of 41.13 points, or 0.89%, to 4,603.80, despite a report showing consumer consumption rose 0.4%, more than expected, in February. In Germany, the DAX Index lost 99 points, or 1.8%, to 5,364 in profit taking after the Japanese market fell overnight and the U.S. market opened lower.
In Asia, the markets ended lower. In Japan, the Nikkei fell 266.04 points, or 2.26%, to close at 11,526.78 as profit-taking in blue-chips and bank shares erased yesterday's gains in technology shares on the back of hopes of reorganization in the sector. In Hong Kong, the Hang Seng fell 186.23 points, or 1.66%, to close at 11,036.60.