Stocks Finish Modestly Lower

Major indexes erased earlier gains amid weakness in Internet names and key Dow issues

Major stock indexes finished lower after a day of volatile trading. Stocks were dragged down following a lower-than-expected White House GDP projection, and poor performances from Internet stocks Google (GOOG ), Yahoo (YHOO ), and Dow components Merck (MRK ) and Boeing (BA ). Earlier in the day stocks were led up by news that Texas Instruments (TXN ) raised its second-quarter guidance.

On Wednesday, the Dow Jones industrial average fell 6.21 points, or 0.06%, to 10,476.86. The broader Standard & Poor's 500 index dropped 2.59 points, or 0.22%, to 1,194.67. The tech-heavy Nasdaq composite index lost 6.98 points, or 0.34%, to 2,060.18.

The White House issued an update of its economic assumptions on Wednesday afternoon. It expects 2005 real gross domestic product to gain 3.4%, down a bit from its previous 3.5% forecast, according to Action Economics.

Earlier strength in the Dow was led by General Motors (GM ), which gained nearly 5% as billionaire investor Kirk Kerkorian said his Tracinda Corp. will raise its stake in the automaker to 7.2%.

Transportation issues were weaker Wednesday after Bear Stearns downgraded several trucking stocks including Landstar System (LSTR ).

U.S. wholesale figures were slightly stronger than expected. Sales rose 1.5% in April, while inventories rose by 0.8%. The March inventory figures were revised to 0.8% from 0.4%, while March sales remained the same at 0.2%.

Energy markets were volatile Wednesday. The weekly EIA inventory data for crude oil fell 13.8 million barrels short of market expectations. July crude oil futures shot up more than a dollar immediately following the news, but then retreated. The drop was triggered by a speculator sell-off when oil hit the $55 a barrel mark, says Action Economics. Prices of crude settled down $1.22 to $52.54 a barrel.

In corporate news Wednesday, Texas Instruments (TXN ) improved its guidance for second-quarter earnings, to the 27-30 cent range, on revenues of between $3.12 and $3.24 billion. The company said it improvement was due to growing demand across a broad range of semiconductor products, along with a seasonal growth in educational calculator products. Standard & Poor's reiterated its hold rating on the stock.

McDonald's (MCD ) posted 4.3% higher same-store sales in the U.S. in May, and 1.8% higher sales worlwide. The fast-food chain did see weakness in Europe, where same-store sales fell by 1.4%.

ImClone Systems (IMCL ) announced that Phase III clinical studies of Erbitux, a drug that battles squamus cell carcinoma in the head and neck, proved effective when used with radiation therapy. In other news, the company reported that investor Carl Icahn has filed to buy between $100 and $500 million in additional shares.

Treasury Market

Treasury prices fell, and yields continued higher, showing little reaction to Wednesday's wholesale data, or the Treasury's 5-year note auction. The yield on the 10-year Treasury note rose to 3.94%.

World Markets

European stock markets finished lower Wednesday. London's FTSE 100 index fell 21.50 points, or 0.43%, to 5,003.70, depsite lower Brent crude oil prices, and ahead of news that the Bank of England is unlikely to raise rates at tomorrow's meetings. However the CBI services index fell in May, the first drop in three months, pointing to a possible slowdown to the British economy.

Germany's DAX index dropped 9.39 points, or 0.22%, to 4,171.35. Yields on 10-year government bonds continued lower, to 3.13%.

In Paris, the CAC 40 index, lost 9.39 points, or 0.22%, moving to 4,171.35. Yields on 10-year bonds were down to 3.14%. STMicroelectronics was higher after UBS raised its rating on the stock to buy from reduce, while stock in Vallourec went up after the company raised its guidance for the first half of 2005.

Asian markets closed higher Wednesday. In Japan, the Nikkei 225 index rose 63.58 points, or 0.57%, to 11,281.03, following the higher guidance from U.S. chipmaker Texas Instruments, and as traders hunted for bargains following yesterday's losses. Tech names Advantest and NEC Electronics rose on the back of the Texas Instruments news. The auto sector, including Toyota Motor, Honda Motor, and Nissan Motor, was also higher.

In Hong Kong, the Hang Seng index rose 61.26 points, or 0.44%, to 13,898.55.

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