Stocks Fall Again

Investors remained in a cautious mood, and booked profits ahead of Friday's employment report

Stocks continued their not-so-happy New Year Wednesday, closing lower for the third straight session as investors cashed in on gains made in late 2004. The mood in the markets was cautious ahead of the December employment report set to be released Friday, as some recent data has shown weakness in the labor picture, according to Standard & Poor's Marketscope.

The Dow Jones industrial average fell 32.95 points, or 0.31%, to 10,597.83. The broader Standard & Poor's 500 index lost 4.33 points, or 0.36%, to 1,183.72. The Nasdaq composite index lost 16.62 points, or 0.79%, to 2,091.24, taking back all of December's gains in the last three days.

Looking ahead to Thursday, among the companies scheduled to release earnings report is consulting firm Accenture (ACN ).

On the economic calendar Thursday, December same-store sales figures for major U.S. chain retailers will be reported, along with initial jobless claims for the week ending Jan. 1.

On Wednesday, the Institute for Supply Management announced that its services index increased to 63.1 in December from 61.3 in November. The number was stronger than expected, according to Action Economics. Notably, the employment index was relatively flat at 54.9 from 55.0.

Oil trading was choppy following the release of weekly inventory data showing inventory of crude oil lower than expected, but supplies of distillate and heating oil higher than expected, according to Action Economics. February NYMEX crude settled down about 1% at $43.39 a barrel.

Bucking the downward trend in the Dow was American International Group (AIG ), which closed 2% higher after announcing a dividend increase. Also helping the blue-chip benchmark was a 1% rise in Procter & Gamble (PG ) after the stock was upgraded by Banc of America Securities.

In corporate news, pharmaceutical giant Bristol-Myers Squibb (BMY ) was reported to be in talks to sell its consumer over-the-counter drug line, which includes popular pain medicines Excedrin and Bufferin, according to the Wall Street Journal and New York Times. The sale is part of the company's plan to cut non-core consumer products. Bristol's stock price closed down slightly.

News from the tech sector was mixed. LSI Logic (LSI ) raised its fourth-quarter sales guidance to a range of $415 million to $420 million from a previous range of $360 million to $390 million. Its stock price rose 12% Wednesday.

Software company Siebel Systems (SEBL ) on Wednesday said its fourth-quarter sales and profit outlook is better than analysts' expectations, thanks to strong licensing revenue. The company projects total revenue to be about $387 million to $390 million, exceeding analysts' expectations of $346.7 million. Its stock price, however, closed down 2.6%. Xilinx (XLNX ) said it expects December-quarter revenues to be down 11% to 12% sequentially, vs. earlier guidance of a 5% to 8% decline. Its stock price closed down 3%.

Delta Air Lines (DAL ) Wednesday announced an aggressive fare-cutting program in an attempt to win customers from low-cost carriers. The third largest U.S. carrier is cutting some domestic fares by as much as half, and pledges that no economy fare would exceed more than $499 one way. The move prompted Merrill Lynch to lower its investment opinion on Delta to sell. Delta's stock price closed down nearly 7%.

News of the fare cuts also created turbulence for other carriers. Shares of Northwest Airlines (NWAC ), AMR Corp. (AMR ), and AirTran (AAI ) were lower as their investment ratings were also cut by Merrill.

Treasury Market

After finishing Tuesday's session with losses following the report on the Federal Reserve's December policy meeting, Treasuries were mixed at the close Wednesday. The yield on the benchmark 10-year note was slightly lower at 4.28%.

The dollar rose against the euro in early morning trading on concerns that the Federal Reserve would raise U.S. interest rates, but gave up some of the gains in midday trading despite the strong service sector report. At the end of the day, the dollar was trading at $1.3262 per euro.

World Markets

European stocks closed lower Wednesday.

In London, the Financial Times-Stock Exchange 100 index fell 41 points, or 0.85%, to close at 4806.00, despite the fact that British December construction PMI was higher than expected.

Germany's DAX index fell 32.26, or 0.75%, to close at 4258.42.

In Paris, the CAC 40 index fell 33.94, or 0.88%, to close at 3829.36.

Asian markets closed lower Wednesday after Wall Street's losses Tuesday and amid concern over rising oil prices. Japan's Nikkei 225 index lost 80.23 points, or 0.70 %, to close at 11,437.52, with tech stocks and banking leading losses.

Hong Kong's Hang Seng index fell 281.54 points, or 2%, to close at 13,764.36, pushed lower by declines in utilities and property stocks.

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