Stocks finished lower, erasing earlier gains, as bond yields headed higher and some companies reported disappointing earnings outlooks. The jump in Treasury yields boosted industries that benefit from inflationary pressures, mainly in the basic materials sector, according to Standard & Poor's MarketScope.
The Dow Jones industrial average fell 32.89 points, or 0.32%, to 10,344.98. The broader Standard & Poor's 500 index was down 5.16 points, or 0.43%, to 1,191.38. The tech-heavy Nasdaq composite index lost 9.4 points, or 0.45%, to 2,100.05.
Oil prices dropped after the release of weekly U.S. energy inventory reports. EIA oil inventory data showed a 4.4 million build in crude inventories, much larger than the 2.3 million barrels expected. That contributed to further weakness in oil prices, down $1.78 to $60.66 a barrel, according to Action Economics.
Coming Thursday are economic reports such as weekly jobless claims, durable goods orders, and new home sales.
On Wednesday, commodities groups such as steel, paper and forest products, and chemicals rose as higher Treasury yields fanned inflation and rate concerns. These groups tend to perform better during inflationary periods. Meanwhile, select technology, managed health care, casino and gaming, and electronics retailing stocks were among the losers in the session.
Among stocks on the move, Amazon.com (AMZN ) was lower after the company cut its operating income forecast for the year. Citigroup lowered its rating on the stock to sell from buy, while Deutsche Bank lowered its rating to hold from buy.
Dow component Boeing (BA ) reported third-quarter earnings of $1.26 per share, vs. 56 cents in the year-earlier period, despite a 4% revenue drop. Results for the current period included a 62-cents benefit from tax settlements and adjustments. The aerospace giant raised its $2.75-$2.85 2005 EPS guidance to $2.95-$3.05, and its $3.00-$3.20 guidance for 2006 to $3.10-$3.30. The stock fell.
Adobe Systems (ADBE ) shares rose after the software maker says it expects fourth-quarter results toward the high end of financial target ranges previously provided: revenue of $490-$510 million and EPS of 27-29 cents.
Automatic Data Processing (ADP ) shares gained after the company posted fiscal first quarter EPS of 38 cents, vs. 35 cents one year earlier, on 10% revenue growth. ADP raised its fiscal 2006 EPS guidance to 22%-25% growth.
Taser International (TASR ) shares fell after the stun-gun maker reported a breakeven third-quarter, vs. 9 cents EPS a year ago, on 38% lower revenue.
Delphi (DPH ) was slightly lower after the auto parts maker said it wants to cut workers' wages by as much two-thirds and eliminate health care for retirees as part of a plan to exit bankruptcy.
Starwood Hotels (HOT ) was lower after reporting third-quarter profit fell 64% on a tax expense.
In economic news Wednesday, the Mortgage Bankers Assn. said its seasonally adjusted index of mortgage applications for the week ended Oct. 21 fell 7.9% to 679.1, the lowest level since mid-April. The group's seasonally adjusted index of refinancing applications dropped 8.5% to 1,916.8. The rates on 30-year fixed-rate mortgages averaged 6.06% last week, down from its 2005 high of 6.09% the prior week.
In equity trading elsewhere, the major indexes in London, Frankfurt, and Paris rose in a rebound from recent weakness. In Asia, Japan's Nikkei 225 index finished higher by 0.86%, while Hong Kong's Hang Seng index closed with a gain of 0.23%.
Treasury yields spiked, with the benchmark 10-year note yield rising to 4.59% from 4.52% on Tuesday. Traders expect the Fed to raise rates by 25 basis points to 4% at next Tuesday's meeting to combat a perceived inflation rise. Some traders are still pondering what Fed Chairman-nominee Bernanke will do when he takes over on Feb. 1. European yields were higher on speculation the European Central Bank is about to hike rates.