Stocks Fall on Profit Worries

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The number of home sales fell during the third quarter, and the inventory of existing single-family homes for sale rose to 10.5 months by October, the highest level since 1985.

S&P expected little market reaction to Wednesday’s reports: the November ADP jobs survey, October factory orders, and third-quarter nonfarm productivity.

January NYMEX crude oil futures fell 99 cents to $88.32 per barrel Tuesday amid uncertainty whether OPEC will increase output or leave it alone at Wednesday’s meeting in Abu Dhabi. There have been numerous, contradictory statements from ministers about

production plans, though the Saudis are likely to determine what happens, according to S&P. Also on Wednesday, the Energy Dept. will release its weekly inventory report. Oil researcher Platts (like BusinessWeek and Standard & Poor’s, a unit of The McGraw-Hill Companies) believes the report will show crude oil inventories fell 1.9 million barrels, gasoline stocks will rise 950,000 barrels and distillate inventories will be unchanged.

Among the stocks in the news on Tuesday, Nokia predicted profit margins should widen and its industry should grow 10% next year while Nokia's market share grows. However, earnings failed to meet high expectations, hurting its stock in European trading. Predictions of lower handset prices hurt stocks of suppliers and competitors.

H&R Block won't sell its Option One Mortgage unit to Cerberus Capital Management, and will shut down lending at the business. H&R Block will take a $75 million charge and lay off about 620 employees. A mortgage servicing business will be sold. After the summer's mortgage market meltdown, Cerberus and H&R Block had been trying to re-negotiate the terms of the sale.

Delta Air Lines (DAL) shares were lower after the carrier said in an 8-K filing that higher-than-expected fuel prices will dampen fourth quarter results. The company cut its 3%-5% fourth-quarter operating margin growth guidance to flat to down 2%.

AutoZone (AZO) shares surged after the retailer posted first quarter EPS of $2.02, vs. $1.73 one year earlier, on 1.3% higher domestic same-store sales and 4.5% higher total sales.

XM Satellite Radio (XMSR) shares fell after Goldman downgraded its rating on the shares to sell from neutral.

Merrill Lynch's (MER) new chief executive, John Thain, is hiring Nelson Chai as chief financial officer. Chai formerly worked for Thain at NYSE Euronext (NYX).

Merck & Co. (MRK) shares dropped Tuesday after the drug maker said it expects earnings of $1.45 to $1.51 per share this year, including charges for a Vioxx product liability settlement. It expects earnings of $3.96 to $4.06 per share in 2008.

Orbitz Worldwide (OWW) reached a deal to distribute the rental car inventory of Avis Budget Group (CAR) through its sites.

Transocean (RIG) will raise $8.5 billion through a variety of debt offerings.

European stocks finished lower Tuesday. In London, the FTSE 100 index was off 1.12% to 6,315.20. In Paris, the CAC 40 index fell 1.46% to 5,547.21. Germany's DAX index declined 0.36% to 7,808.94.

Major Asian markets were mixed. Japan's Nikkei 225 index lost 0.95% to 15,480.19. In Hong Kong, the Hang Seng index rose 0.77% to 28,879.59. The Shanghai composite index was up 0.97% to 4,915.89.

Treasury market

Treasury prices finished lower Tuesday as profit-taking eroded early gains. The 10-year note was down 05/32 at 103-04/32 for a yield of 3.872%, and the 30-year bond was off 08/32 at 110-31/32 for yield of 4.337%. Credit concerns continued to dominate trading , keeping equities on shaky footing, and maintaining an underlying bid in Treasuries.