Stocks finished modestly lower Wednesday, as investors digested another round of earnings reports and a steep drop in oil prices. Unexpected increases in factory orders and in a key service-industry gauge fanned inflation fears, driving bond yields up, says Standard & Poor's MarketScope.
The Dow Jones industrial average edged lower 16.17 points, or 0.14%, to 11,400.28. The broader Standard & Poor's 500 index declined 5.36 points, or 0.41%, to 1,307.85. The tech-heavy Nasdaq composite slipped 5.87 points, or 0.25%, to 2,303.97, hampered by Apple (AAPL), Microsoft (MSFT) and Intel (INTC).
Economic reports Wednesday came in stronger than projected, increasing inflation worries. The Institute for Supply Management's non-manufacturing index surged unexpectedly to 63.0 in April from 60.5 in March, says Action Economics. Factory orders jumped 4.2%, also above forecasts.
Expect more rate hikes, some economists say. "Data on growth and inflation continue the sense of a Fed falling further behind the curve," says David Malpass, chief global economist at Bear Stearns. "We think the Fed still has room to maneuver."
Federal Reserve Chairman Ben Bernanke spoke at an economic summit, but stuck to his topic of "revitalizing communities." Investors were watching to see if he might clear up confusion over hints of a tightening "pause" in his recent congressional testimony.
Thursday's calendar holds the Labor Department's release of U.S. productivity numbers. First-quarter nonfarm productivity is expected to bounce to 2.8% after a 0.5% fourth-quarter decline, says Action Economics. Major retailers are also set to release April sales figures. Elsewhere, initial jobless claims are seen holding steady at 315,000 for the week ended April 29.
Earnings news weighed on blue-chip indexes Wednesday. Time Warner (TWX) was lower after the media conglomerate said first-quarter sales rose less than 1%, to $10.5 billion, as revenue at its film and AOL units declined.
Consumer-goods giant Procter & Gamble (PG) was lower even though the company raised its profit forecast for the fiscal year ending in June after posting third-quarter earnings of 63 cents a share, topping expectations.
The Nasdaq composite got help from Qualcomm (QCOM). The chipmaker was higher after raising its fiscal third-quarter profit outlook.
Meanwhile, software maker Adobe Systems (ADBE) was sharply lower after the company said it expects fiscal second-quarter sales of about $640 million as demand falls in Europe and North America
Health insurer Cigna (CI) fell sharply after posting 19% lower earnings. Aetna (AET) was among other insurers falling on the news.
Companies reporting earnings Thursday include Eastman Kodak (EK), International Paper (IP) and Tyco International (TYC).
In M&A talk, Warner Music Group (WMG) rose on news the company rejected a takeover bid by music-industry rival EMI.
On the brokerage front, Motorola (MOT) was higher after Banc of America Securities boosted its rating on the cellphone maker from neutral to buy.
In the energy markets Wednesday, June West Texas Intermediate crude oil futures closed down $2.33 at $72.28 a barrel, after a weekly inventory report showed supplies unexpectedly rose 1.7 million barrels.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index fell 72.1 points, or 1.19%, to 6,010. Germany's DAX index dropped 82.33 points, or 1.36%, to 5,968.96. In Paris, the CAC 40 index slid 47.25 points, or 0.9%, to 5,193.94.
Asian markets finished mostly higher. In Hong Kong, the Hang Seng index added 158.94 points, or 0.94%, to 17,026.98. Korea's Kospi index edged higher 0.27 points, or 0.02%, to 1,435.17. Japan's Nikkei 225 index was closed for a holiday after on Tuesday rising 228.06 points, or 1.35%, to 17,153.77.
Treasury yields rose to multi-year highs after the unexpectedly strong data. Prices for 10-year Treasury notes fell to 95-04/32 with a yield of 5.14%, while 30-year bonds dropped to 89-01/32 for a yield of 5.23%.