Stocks declined Wednesday as investors booked some profits from Tuesday's rally. With no new economic data to focus on, investors turned their attention to earnings updates and other corporate news, which tended to be on the negative side. Sectors that showed the greatest weakness included textiles, networking equipment, chemicals, advertising, and railroads.
The Dow Jones industrial average lost 183.20 points, or 2.31%, to 7,755.61, dragged down by cyclical components such as Du Pont (DD). The tech-heavy Nasdaq composite index was down 26.33 points, or 2.17%, to 1,187.39, despite an upbeat forecast from Dell Computer (DELL). And the broader Standard & Poor's 500-stock index fell 19.99 points, or 2.36%, to 827.92.
Economic reports due Thursday include factory orders, ISM services index, and weekly jobless claimes. Economic research outfit MMS International expects August factory orders to decrease 0.2%, while shipments slide 0.6%. However, overall factory inventories should be flat on the month, putting a halt to 18 straight months of declines. This would bode well for the production outlook, but the market will also be interested to see the ISM non-manufacturing release, says MMS.
On Wednesday, shares of medical-devices maker Guidant (GDT) were down on news that a U.S. district court ruled in favor of Boston Scientific (BSX) in drug-coated stent patent litigation with Cook Inc. The ruling prevents Guidant from selling a paclitaxel-coated stent using existing clinical data, and gives Boston Scientific the chance to capture a large chunk of the projected $5 billion market.
And diversified chemicals stocks, which were big gainers on Tuesday, fell after Dow Chemical (DOW) says it expects third-quarter EPS to be about 16 cents, the same level as a year ago, because of higher feedstock costs, particularly in Europe.
On the bright side, Dell Computer raised its third-quarter revenue forecast to $9.1 billion from $8.9 billion after the market close Tuesday. The PC maker also said earnings per share would be 21 cents, the high end of its previous outlook, thanks to growth in shipments of servers and storage systems.
In the networking group, Cisco Systems (CSCO) fell after UBS Warburg cut earnings estimates.
Treasuries closed mostly higher in a choppy session, as stocks lost ground in the afternoon. By the close, the entire yield curve had mostly flatlined in a light session with the long bond taking an upside lead, says MMS International.
European markets were higher on the back of Tuesday's gains in the U.S. market and hopes for an earnings recovery. In London, the Financial Times-Stock Exchange 100 index was up 107.80 points, or 2.84%, to 3,905.20.
In France, the CAC 40 gained 112.28 points, or 4%, to 2,940.84. French liquor company Pernod Ricard rallied after it said first-half profit rose 47% and that full-year profit will meet forecasts. And in Germany, the DAX Index was up 61.51 points, or 2.15%, to 2,926.74.
Asian markets finished mixed. The Nikkei fell 112.93 points, or 1.23%, to close at 9,049.33, led by banks. Major stock indices fell for the third consecutive day in Japan, as early gains fueled by a sharp recovery of U.S. equities overnight were offset by uncertainty over the domestic financial system and corporate earnings.
In Hong Kong, the market gained 37.14 points, or 0.41%, to close at 9109.35.