Stocks Sink on Earnings Worries

Downbeat news from Intel, ADP, and DuPont prompted selling. Thursday brings fourth-quarter profit updates from a host of big-name companies

Stocks declined Wednesday on persistent concerns about 2003 corporate earnings and after disappointing news from tech bellwether Intel (INTC ), which is pulling back sharply on its capital spending plans. News that the latest U.S. diplomatic overtures toward North Korea to dismantle its nuclear program were sharply rebuffed by Pyongyang also weighed on the market.

The Dow Jones industrial average fell 119.44 points, or 1.35%, to 8,723.18. The broader Standard and Poor's 500-stock index dipped 13.44 points, or 1.44%, to 918.22, while the Nasdaq composite index fell 22.19 points, or 1.52%, to 1,438.80. Leading the drop, Automatic Data Processing (ADP ) cut its profit forecast and DuPont (DD ) said its fourth-quarter earnings trailed expectations.

Investors were heavily trading Intel, which offered mixed signals. The chipmaker reported fourth-quarter earnings per share of 16 cents, beating the Wall Street consensus estimate by 2 cents, but the company said its 2003 capital spending will come in far below analysts' forecasts.

Intel's scaled-back spending plans could signal leaner times for semiconductor capital equipment makers such as Applied Materials (AMAT ), which fell in early morning trading. Intel's shares also moved lower.

Meanwhile, two other marquee tech names, Yahoo! (YHOO ) and Apple Computer (AAPL ), reported earnings after the closing bell.

For its fiscal first quarter, Apple missed expectations by posting a net loss of $8 million, or 2 cents per share, compared to a net profit of $38 million, or 11 cents per diluted share, in the year-ago quarter. Revenues for the quarter were $1.47 billion, up 7% from the year-ago quarter. The quarter's results included a $17 million after-tax restructuring charge and a $2 million after-tax accounting transition adjustment. Excluding these items, Apple's net profit for the quarter would have been $11 million, or 3 cents per share. Apple's shares fell in after-hours trading.

Yahoo's net income was $46.2 million or 8 cents per diluted share, compared with a net loss of $8.7 million or 2 cents per diluted share for the year-earlier period. Net revenues totaled $285.8 million, a 51% increase -- better than analysts had expected. Still, the stock fell 7% in after-hours trading.

Several major financial institutions reported their quarterly results Wednesday. Bank of America (BAC ) said net income rose 27% in the fourth quarter on higher fees from mortgages and credit-card loans and lower costs. Fifth Third Bancorp (FITB ), National City Corp. (NCC ), and Keycorp (KEY ) also reported higher fourth- quarter profit as the lowest interest rates in four decades prompted consumers to increase mortgage borrowing and charge more on their credit cards.

Mortgage consolidator Fannie Mae's (FNM ) fourth-quarter earnings fell 52% as the company reduced by $1.88 billion the value of its derivatives used to protect it from interest-rate swings. The government-sponsored enterprise's net income fell to $952.2 million, or 94 cents a share, from $1.97 billion, or $1.92, a year earlier. The expense reflects new accounting rules governing the value of so-called purchase-option expenses, Fannie Mae told Bloomberg.

Not including the derivatives expense, Fannie Mae's income rose to $1.67 billion, or $1.66 a share, from $1.44 billion, or $1.40 a share, reflecting a record level of home-loan refinancing by consumers and a wider spread between Fannie Mae's borrowing costs and investment returns.

Thursday is a huge day for earnings, with IBM (IBM ), Microsoft (MSFT ), Sun Microsystems (SUNW ), General Motors (GM ), FleetBoston (FBF ), Delta Airlines (DAL ), Forest Labs (FRX ), and eBay (EBAY ) all reporting results. Conglomerate General Electric (GE ) will release fourth-quarter profits on Friday.

Genentech (DNA ) fourth quarter profits met expectations on demand for two key cancer drugs, while Idec Pharmaceuticals (IDPH ) also jumped on higher sales of a cancer drug.

In economic news, the producer price index, a measure of prices paid to U.S. factories, farmers and other manufacturers, was unchanged in December, restrained by cheaper cars and computers, as slow economic growth limited pricing power. says producer prices failed to meet expectations, despite substantial increases in energy costs.

The index of wholesale prices unexpectedly held steady at 139.5 following a 0.4% drop in November, the Labor Department said. Excluding food and energy, prices in the so-called core index dropped 0.3% after falling 0.3% the previous month.

Confirming the trends revealed in the PPI, the National Federation of Independent Businesses' survey of small businesses recorded a sizable setback in its selling price index in December, reversing the modest firming during the past year. The "planned" selling price index stayed firm, underscoring that companies are keen to escape the deflation of recent years, The Bank Credit Analyst reported.

Treasury Market

Treasuries finished mixed Wednesday after giving up most of their earlier gains. The market was supported by North Korea's frosty response to U.S. offers to resume talks and the weakness in stocks.

World Markets

European stocks finished lower in Wednesday's session. London's FTSE index was down 57.80 points, or 1.46%, to 3,887.80. Paris' CAC-40 index fell 39.37 points, or 1.24%, to 3,134.66. In Frankfurt, the DAX index edged down 49.32 points, or 1.52%, to 3,049.40.

In Asia, stocks ended higher. Japan's Nikkei 225 Index climbed 58.69 points, or 0.69%, to 8611.75, while Hong Kong's benchmark Hang Seng jumped 77.18 points, or 0.79%, to 9,873.49.

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