Stocks finished with slight losses Wednesday. A late burst of buying helped the major indexes make up most of the ground lost earlier in the session on news that Hewlett-Packard (HPQ) and Walt Disney (DIS) lowered their earnings forecasts.
Updates on worker productivity and conditions in the service sector provided some positive news. But the market hasn't respond positively to the latest batch of constructive economic news, said economist John Lonski of Moody's Investors Service, in a note to clients.
On Wednesday, the Dow Jones industrial average was down 5.08 points, or 0.06%, to 8,737.85 The tech-heavy Nasdaq composite lost 18.66 points, or 1.29%, to 1,430. The broader S&P 500-stock index fell 3.24 points, or 0.35%, to 917.
Leading the tech sector, the computer maker H-P cut its sales-growth estimate from 4%-6% to 2%-4% for the year ended October. The stock was down 4.4%. While Morgan Stanley discouraged investors from buying semiconductor and computer stocks, Merrill Lynch tech analyst Steve Milunovich said that H-P's analyst meeting gave him increased confidence in management's capability. "There are also glimpses of H-P [emerging] as an IT powerhouse," Milunovich said in a research note.
Investors Thursday will be watching closely two industry leaders: Merck & Co., which is set to provide detailed guidance on 2003 earnings, and Intel, the chipmaking giant, which will have a mid-quarter business update. In economic news, weekly state jobless claims for the last week of November and chain store sales will be reported, followed on Friday by the employment report from the Labor Department.
In economic news Wednesday, the Institute for Supply Management's service sector or non-manufacturing index showed strong expansion in November -- as expected. It rose to 57.4 from 53.1, a six-month high and a positive sign for the economy heading into Christmas. "The U.S. service sector is rebounding by far more than was anticipated," proclaimed Economy.com. Factory orders recorded their first increase in three months, at 1.5% growth, although the increase was expected to be 1.7%.
U.S. productivity also rose at a revised 5.1% annual rate from 4%, the Labor Dept. reported.
Stocks trading in heavy volume include AOL, Merck (MRK), and Ford Motor (F). AOL on Tuesday provided a gloomy 2003 earnings picture for the America Online division at an analyst's meeting. Merck reaffirmed its 2002 and 2003 earnings guidance two days ahead of a schedule, but said it will issue more detailed guidance Dec. 5. Ford's stock was up 2% on word that Ford's November sales rebounded from a weak month of sales in October, even though the November figures were 16.6% below the year-earlier sales.
Disney fell 4.6% after the entertainment company said profit in the fourth quarter ended Sept. 30 was 9 cents a share, down from a previously reported 11 cents. Disney said federal regulators are investigating whether some outside directors aren't sufficiently independent. CIBC analyst Michael Gallant, who covers Disney, said in a research note: "We believe the SEC inquiry to be largely a non-issue as it is not related to accounting in any way."
J.D. Edwards (JDEC )fell 11.6% after the software maker said profit, excluding some costs in the first quarter ending in January will be little changed from a year earlier, when it was 3 cents a share. It was expected to earn 4 cents, the average estimate of nine analysts polled by First Call.
Office Depot (ODP) fell 6.2% after the office-supplies retailer said sales at North American stores open at least a year will fall this quarter because of sales shortfalls in the past two months.
U.S. Treasuries finished with gains. MMS International said prices in the front-end appeared to be leading the broader Treasury market higher. Traders are looking ahead to Friday's payroll data for a better indication on the economy.
Europe's economy may shrink in the first quarter, the second contraction in a decade, adding to pressure on the European Central Bank to lower interest rates. In London, the FTSE-100 index was down 26.8 points, or 0.66%, to 4,048.60. Frankfurt's DAX index shed 28.25 points, or 0.86%, to 3,281.36, on weak labor market news in Germany. The Paris CAC 40 index closed down 22.42 points, or 0.70%, to 3,199.84.
In Asia, stocks declined. Japan's Nikkei 225 Index finished down 198 points, or 2.16%, to 9,006.73. In Hong Kong, the Hang Seng index fell 231.28 points, or 2.26%, to 9995.7.