Stocks Post Solid Losses

Weakness in semiconductor shares helped push the Nasdaq down by more than 2%. Financial issues led blue chips lower

Stocks finished lower Wednesday as major selling in technology and financial stocks offset gains in airline and pharmaceutical issues. The Nasdaq composite index was hit hard amid some profit-taking in techs as leading semiconductor companies failed to raise earnings guidance.

The Dow Jones industrial average fell 86.74 points, or 0.91%, to 9,420.46, as weakness in techs and financials was tempered by strength in defensives like Coca-Cola (KO ), Merck (MRK ), and Johnson & Johnson (JNJ ). The broader Standard & Poor's 500 index lost 12.24 points, or 1.2%, to 1,010.93.

The worst performer among the major indexes was the tech-heavy Nasdaq, which skidded 49.55 points, or 2.64%, to 1,823.88.

The selling seemed to pick up Wednesday afternoon when news wires reported that Al Jazeera was showing new footage of al Qaeda leaders Osama Bin Laden and Al Zawahri. However, the footage, in which a deputy called on Iraqi guerrillas to "bury" American troops, was made in late April or early May, according to news reports.

Semiconductor stocks were pulled lower after Texas Instruments' (TXN ) third-quarter earnings per share guidance was less than some had expected. The chipmaker narrowed its third-quarter outlook for revenue to the upper half of its prior outlook, but it's now below the analysts' consensus estimate. TI now sees $2.39 billion to $2.49 billion in revenue, vs. its prior range of $2.29 billion to $2.49 billion. The company expects third-quarter EPS of 20 cents to 22 cents, vs. its 19 cents to 23 cents prior forecast.

Xilinx (XLNX ) was also down as the company says September-quarter sales will be little changed from June-quarter sales, in-line with its prior guidance.

The news from Texas Instruments, coupled with Tuesday's selloff on revenue concerns at Nokia and overbought technicals, put buyers on the defensive, notes economic research outfit MMS International. "Worries that the equity market already priced the rosiest scenario for corporate profits - given the Nasdaq's nearly 40% rise for the year - had traders booking profits and somewhat gun-shy to 'buy the dip' at current lofty levels," says MMS.

Financial stocks also fell on worries about the implications of sharply higher rates on the mortgage and refinancing market, says S&P MarketScope. Homebuilding stocks were down in sympathy.

National City (NCC ) shares fell after the company says it expects 2003 EPS to be about $3.00, given the recent rise in long term interest rates and associated effects on its mortgage business.

One bright spot was Genentech (DNA ) and XOMA (XOMA ), which rose after the companies say an FDA advisory committee has recommended approval of companies' Raptiva for treatment of moderate to severe plaque psoriasis in adults age 18 or older. First Albany keeps strong buy on Genentech and a buy rating on XOMA.

Airline stocks were also flying higher after several Wall Street firms raised their forecasts for key companies in the group. Morgan Stanley raised its rating on Southwest Airlines (LUV ) to overweight, on the belief that it will outperform as the growth potential becomes clearer.

After the market close, graphics software maker Adobe Systems (ADBE ) reported better-than-expected earnings.

Economic data coming Thursday include weekly jobless claims, goods and services trade, and import and export prices. The key economic updates will be released Friday, when reports on retail sales, the University of Michigan's consumer sentiment index, and producer prices are due.

Treasury Market

The advent of the second anniversary of September 11 Thursday helped give a solid safe-haven bid to bonds and overshadowed incoming supply from the Treasury, says MMS International. The curve retained its steepener shape, as the 5-year note outperformed as traders showed strong interest for the Treasury's note auction.

There was little in the way of market moving data to get the market rolling, although the 45% surge in mortgage refinancing applications supported early gains in Treasuries, as did talk that the Bank of Japan could be putting intervention dollars to work and modest weakness in equities, says MMS International.

World Markets

European stock markets were lower. London's Financial Times-Stock Exchange 100 index fell 11.8 points, or 0.28%, to 4,252.1. In Paris, the CAC 40 declined 46.55 points, or 1.38%, to 3,328.71. Germany's DAX index lost 57.5 points, or 1.6%, to 3,536.9.

Asian markets finished lower Wednesday. In Japan, the Nikkei 225 index lost 65.72 points, or 0.6%, to close at 10,856.32, led by profit taking mainly on tech shares following Wall Street's overnight fall. In Hong Kong, the Hang Seng index fell 236.51 points, or 2.14%, to close at 10,810.31.

Before it's here, it's on the Bloomberg Terminal.