Stocks finished Wednesday's session with sharp losses as investors were hit with profit warnings from tech giants Apple Computer (AAPL) and Advanced Micro Devices (AMD) as well as the latest episode of Mideast violence.
The major indexes finished near their worst levels of the session. Dow Jones industrial average ended down 144.55 points, or 1.49%, to 9,561.57. The Nasdaq composite index pulled back 46.12 points, or 2.99%, to 1,496.84. And the Standard & Poor's 500 index lost 17.15 points, or 1.65%, to 1,019.99.
"This is a very tenuous market. After one-and-a-half good days, traders took their profits, so now we're back to the same old grind. The problem is a lack of positive conviction. Without it, long-term investors don't feel comfortable getting in," says Stephen Carl, principal and head of U.S. Equity Trading, at the Williams Capital Group.
On Thursday, investors will digest economic reports on manufacturing in the Northeast, leading economic indicators and unemployment.
On the earnings front, markets will also see the latest from Goldman Sachs (GS), Bed, Bath & Beyond (BBBY), Solectron (SLR) and American Healthways (AMHC).
Updates from tech companies Wednesday provided further evidence that a whole-hearted recovery in the tech sector is far off. Personal computer maker Apple warned that earnings for the current quarter would fall short of its earlier guidance, with revenues declining 10% due to weaker sales to consumers and customers in the advertising and publishing businesses.
Semiconductor maker AMD said it expects to report a "substantial" second-quarter operating loss on weakness in PC sales. The company expects revenues to fall far short of estimates. AMD now sees revenues in the $620 million to $700 million range, off from earlier guidance of $820 million to $900 million. Analysts surveyed by First Call had on average predicted a loss of about $0.09.
Shares in AMD rival Intel (INTC) stumbled as well after it said it would take a $100 million charge during the second quarter as it exits its Web hosting operations. Intel had cut its revenue target in early June.
Meantime, the latest report of violence in the Mideast -- this time a bomb blast at a bus stop in a northern Jerusalem neighborhood Wednesday evening that killed seven people and injured 35 more -- weighed on the market as well.
In other tech news, Ciena (CIEN), which makes telecommunications equipment, said fiscal third-quarter revenues could be "down meaningfully" as a result of its proposed merger with network gear maker ONI Systems (ONIS).
And Micron Technologies (MU) confirmed that the Antitrust Division of the U.S. Department of Justice was conducting an industry-wide investigation into alleged anticompetitive practices among memory chip makers. Micron has received a grand jury subpoena seeking information relating to the investigation.
Companies within the financial services industry were also lower. Among stocks under pressure Wednesday Morgan Stanley (MWD) reported profits that fell for the seventh straight quarter as a result of the stock market slump.
On a more positive note, database software company Oracle (ORCL) reported $0.12 earnings per share, in line with expectation. The company predicted ongoing weakness for its business until the tech spending environment reverses course.
Goodyear Tire & Rubber (GT) also offered some good news. Its second-quarter earnings forecast will be better than anticipated previously on cost-cutting efforts and improved international results. The tiremaker says is expects to earn $0.10 per share to $0.15 per share, up from $0.05 to $0.10.
Clorox (CLX) expects to report strong profit gains for the quarter on better sales in North America. The consumer goods company says increased spending on advertising its top products, like Clorox bleach and Glad plastic bags helped increase volume.
U.S. Treasuries soared in price amid steep losses in equities and continued turmoil in the Mideast.
Thursday will hold some potentially market-moving economic updates. According to S&P's MMS, the June Philadelphia Fed index at 10.0, up from 9.1 in May. This would leave the overall reading in line with the 12.7 average level seen for the first five months of the year and would suggest continued recovery.
The May index of leading economic indicators is expected to rise by 0.1% for the month after an 0.4% drop in April. The increase is anticipated to be narrowly based, with only 3 of the 10 components expected to rise.
MMS expects initial jobless claims to fall 5,000 to the 385,000 level for the week ended June 15. A decline at this level would pull the four-week moving average 10,000 lower to the 393,000 level -- one of the lowest levels of the year.
European markets finished lower on weakness in tech companies based there and bad news from their U.S. counterparts. In London, the Financial Times-Stock Exchange 100 index ended off 49.60 points, or 1.05%, to 4,652.40. In France, the CAC 40 finished down 69.35 points, or 1.73%, to 3,935.58. And in Germany, the DAX Index pulled back 79.03 points, or 1.78%, to 4,354.82.
In Asia, the markets finished lower. In Japan, the Nikkei tumbled 363.75 points, or 3.36%, to close at 10,476.18. Tokyo stocks hit a four-month low, with losses led by brokerages and high-tech firms amid ongoing pessimism over the outlook for U.S. stocks. In Hong Kong, the benchmark Hang Seng index fell 178.93 points, or 1.65%, to close at 10,673.11.