It could have been worse. One day after the Dow Jones industrial average and the Standard & Poor's 500-stock index closed at record highs, stocks were hit Wednesday by a barrage of bad news: earnings warnings, disappointing profit reports, weaker than expected economic data, and a strike at a major U.S. automaker.
The icing on the cake: News that aerospace behemoth Boeing (BA) is delaying delivery of its 787 Dreamliner by six months.
And while major indexes sagged, they didn't swoon, ending Wednesday's session mixed.
On Wednesday, the Dow Jones industrial average fell 85.84 points, or 0.61%, to 14,078.69, weighed down by a 2.7% decline in Boeing. The broader S&P 500 index shed 2.68 points, or 0.17%, to 1,562.47.
The Nasdaq composite index added 7.7 points, or 0.28%, to 2,811.64.
The broader market was slightly negative, with 17 shares declining in price for each 16 that rose on the NYSE. Nasdaq breadth was 15-14 negative.
Bullish sentiment engendered by the release of the Sept. 18 FOMC minutes Tuesday gave way to anxiety about third-quarter corporate profits after disappointing announcements from big names like Alcoa (AA), Monsanto (MON), International Paper (IP), and Chevron (CHV).
Boeing, a component of the Dow industrials, is delaying by six months initial deliveries of its widely anticipated 787 Dreamliner due to challenges completing assembly of the first airplanes, according to press reports.
In other corporate news, members of the United Auto Workers union went on strike against Chrysler after marathon labor talks between the union and the money-losing automaker failed to avert the industry's second strike in the last two weeks.
The economic calendar was light Wednesday. August wholesale inventories rose by a less than expected 0.1% to a seasonally adjusted $399.02 billion after rising 0.2% in July. August sales rose 0.4% following an upwardly-revised 0.2% July gain. The inventory-sales ratio was steady at 1.11 for a fourth straight month.
The National Association of Realtors lowered its 2007 home sales forecast to 5.78 million units from 5.92 million previously its 2008 forecast to 6.12 million from 6.27 million. But NAR raised its 2007 new home sales forecast to 804,000 units from 801,000 previously and its 2008 forecast to 752,00 from 741,000 thanks to widening credit availability. NAR said existing home prices are expected to fall 1.3% to a median of $219,000 in 2007 before rising 1.3% to $221,800 in 2008. NAR expects the median new-home price to fall 2.1% this year and rise 1.0% next year.
Wall Street will likely focus on reports covering initial jobless claims, the U.S. trade balance, producer prices, and retail sales to be released later in the week for guidance on the health of the economy.
Alcoa kicked off third quarter earnings season after the close of trading Tuesday. The aluminum giant posted lower-than-expected earnings per share of 64 cents, vs. 62 cents one year earlier, on a 3.2% revenue decline. The company cited a weakening U.S. dollar, higher petroleum costs, and market softness in North America for the shortfall. Alcoa's board increases authorization to repurchase shares to 25% of outstanding shares, up from the previously authorized 10%.
The bad news kept coming Wednesday morning. Energy major Chevron said its third quarter net income is expected to be "significantly below" the record $5.4 billion earned in the 2007 second quarter. The company cited a sharp decline in refined-product margins and the impact of nonrecurring items.
Also in the energy group, Valero Energy (VLO) said it expects EPS of $1.30-$1.40, excluding special items.
The refiner notes lower throughput margins primarily due to substantially higher feedstock costs resulting from increased premiums for light sweet crude oils and narrower discounts for sour crude oils and other feedstocks.
Dow industrial component International Paper said third-quarter EPS will be less than analysts' consensus estimates due to lower land sales than previously estimated in the quarter. The company continues to expect EPS will exceed the 52 cents posted in the 2007 second quarter.
Agricultural-sciences outfit Monsanto posted a wider than expected seasonal fourth-quarter loss of 39 cents per share, vs. a 27-cent loss one year earlier, as acquisition-related charges offset a 13% total sales rise.
Pet-supply retailer Petsmart (PETM) said it sees third-quarter same-store sales growth below original low-to-mid single digit forecast. The company now sees third quarter EPS of 17-20 cents, and full-year 2008 EPS of $2.02-$2.07 (down from its previous view of $2.08-$2.10).
Bucking the trend, warehouse-club retailer Costco Wholesale (COST) posted better than expected fourth-quarter EPS of 83 cents, vs. 75 cents one year earlier, on a 5% same-store sales rise and a 3% total sales rise.
Crude oil for November delivery rose $1.04 to $81.30 a barrel Wednesday on late hedge
fund buying and some short covering following reports of a strike at a Chevron facility in Nigeria.
Gold for December delivery was higher at $749.00 per ounce, while the dollar index was lower at 78.27.
European markets ended mixed Wednesday. In London, the FTSE 100 index gained 0.27% to 6,633. In Paris, the CAC 40 index shed 0.4% to 5,838.49. Germany's DAX index was 0.08% higher at 7,986.57.
Asian markets ended higher Wednesday. Japan's Nikkei 225 index added 0.1% to 17,177.89. In Hong Kong, the Hang Seng index climbed 1.21% to 28,569.33.
Treasuries closed marginally higher in price Wednesday. The 10-year note edged up 02/32 to 100-28/32 for a yield of 4.64%. The 30-year bond firmed 01/32 to 102-08/32 for a yield of 4.89%.
Treasury yields moved in tandem with equities, evidence that the stock market is more concerned with the health of the economy than inflation risks, says S&P MarketScope.