Stocks ended lower on Wednesday, with the Nasdaq off nearly 1.5%, on downbeat news from several technology companies, including industry bellwether Cisco System (CSCO).
The Dow Jones industrial average was down 6.35 points, or 0.06%, at 9,938.32. The broader Standard & Poor's 500 index declined 3.25 points, or 0.30%, to 1,075.79. The tech-heavy Nasdaq fell 26.28 points, or 1.45%, at 1,782.42.
Looking ahead, Thursday will be a busy day on the earnings front with plenty of corporate results to guide trading. Among the companies due to report are a trio of tech names: Analog Devices (ADI), Dell (DELL), and Agilent Technologies (A) . Also reporting are retailers Wal-Mart (WMT), Target (TGT), and Kohl's (KSS).
On the economics front, investors will be watching for retail sales numbers for July. They are expected to show a 0.8% increase vs. a 1.1% decline in the previous month. Also of note will be June business inventories with economists expecting a 0.5% rise vs. a 0.4% rise in the previous month.
On Wednesday, networking gear maker Cisco was down after announcing after the previous session's close that inventories rose and that its customers were becoming more cautious. But the company also posted a 41% rise in quarterly profit.
Another tech stock weighing on the market Wednesday was National Semiconductor (NSM) after the chipmaker warned it sees quarterly revenue dropping because of lower-than-forecast demand.
Keeping losses under control was news that oil prices declined to near the $44 mark after topping $45 earlier in the week as Saudi Arabia's oil minister said the oil producer could tap spare production capacity right away if it needs to, according to Informa Global Markets. High oil prices can dent corporate profits, hurting stocks.
The downward move in the market came a day after a big rally following the Federal Reserve's decision to raise the Federal funds rate by a quarter-percentage point to 1.50%. Although the Fed said the economy was showing signs of continuing to expand, it also warned that higher energy prices and other factors had limited output and jobs growth.
In economics news, a report showed the U.S. ran a budget deficit of $69.2 billion in July compared with a deficit of $54 billion in July a year ago. This was larger than the market consensus of a $61 billion deficit, according to Informa Global Markets. Receipts rose 8.8% year over year but expenditures rose an even greater 14.5%.
The cumulative deficit for the first 10 months of the fiscal year is $395.8 billion, up $72 billion from the $324 billion deficit in the first 10 months of the previous fiscal year, Informa says. The Congressional Budget Office projects a budget deficit of $422 billion for the entire fiscal year while OMB sees a $444 billion deficit. Both would be records and well above the $374 billion deficit last year.
Also in stocks news on Wednesday, Federated Department Stores (FD), the name behind the Macy's and Bloomingdale's chains, posted a decline in quarterly profits including $59 million in costs to buy back debt.
Clothing retailer Abercrombie & Fitch (ANF) posted 23% higher profits thanks to fatter margins. But the company put Wall Street on notice that its third-quarter results may miss analyst targets.
Treasuries finished mostly higher as investors digested the Fed's bullish outlook on the U.S. economy, according to Informa Global Markets. Nonetheless, higher energy prices and steady terrorist risk continue to undermine sentiment somewhat. The market's reaction to a decent auction of ficvresults and stellar retail demand has been muted, Informa says. Market players on Thursday will focus on initial claims and retail sales data.
European stock markets closed lower on Wednesday. London's Financial Times-Stock Exchange 100 index eased 38.70 points, or 0.89%, to 4,312.20. S&P MarketScope Europe reports the index was hit by heavyweight blue chip stocks trading ex-dividend, including BP (-1.4%), Shell (-2.0%), HBOS (-2.3%), and Lloyds TSB (-2.4%). UK bank stocks were weaker overall following recent strength on back of consolidation hopes.
In Germany, the DAX index was lower by 41.73 points, or 1.12%, to 3,678.91. S&P MarketScope Europe reports shares remain under pressure as oil price rises further, and that Cisco's announcement that inventories and sales fell short of expectations also weighed on the market. The news from Cisco hit tech stocks in particular: Infineon (-3.84%), SAP (-2.69%), and Siemens (-1.86%).
In Paris, the CAC 40 index lost 30.11 points, or 0.85%, to 3,502.95. S&P MarketScope Europe reports that Cisco's cautious comments weighed on the French market. Tech shares lead the downturn with Alcatel (-4.31%) slumping. Cap Gemini (-3.87%) also came under pressure as it reported second quarter sales at the bottom end of forecasts.
Asian stock markets closed mixed. Japan's Nikkei 225 index gained 95.91 points, or 0.88%, to 11,049.46. Comments from the U.S Federal Reserve spurred Asian stocks higher, as investors shrugged off a widely expected U.S. interest rate rise. Shares of many exporters bouncing back on renewed optimism about an export-led recovery in the Japanese economy. Toyota climbed 3.15% and Nissan roes 2.02%. Banking, property and construction shares also rose on the improved sentiment. Shares in top banks were boosted by a court ruling that allowed UFJ Holdings to include its trust business in its merger discussions with Sumitomo Mitsui Financial Group. UFJ Holdings leaped 5.18%.
In Hong Kong, the Hang Seng index fell 64.91 points, or 0.52%, to 12,343.13 on concerns over soaring oil prices and companies' first half results, despite Wall Street gains.