Stocks finished lower Tuesday as investors booked profits in industry groups that had posted solid gains in recent sessions such as technology and airlines.
The Dow Jones industrial average fell 65.83 points, or 0.69%, to 9,520.46. The broader Standard & Poor's 500 index lost 7.7 points, or 0.75%, to 1,023.94. The tech-heavy Nasdaq composite index was down 14.04 points, or 0.74%, to 1,874.58.
The declines come after the major averages hit new yearly highs Monday on hopes for rising profits and a better capital expenditure outlook.
Helping drag down tech stocks Tuesday was news from Nokia (NOK), which forecasted flat to lower third-quarter revenues at its mobile phone unit, due to pricing pressures. Despite its mid-quarter update that suggested earnings per share would be at the high end or above current consensus, investors focused on Nokia's malaise in mobile phone revenues.
Some tech outfits, though, continued to show strength. Research in Motion (RIMM), best known for its BlackBerry device, was trading sharply higher after the company raised August-quarter guidance. It raised its $105 million to $115 million second-quarter revenue forecast to $123 million to $126 million. The company sees second-quarter EPS of 2 cents to 5 cents, and 7 cents to 11 cents excluding patent litigation provision. Merrill Lynch and JP Morgan upgraded the shares.
Also higher were gold stocks, as the yellow metal rallied on continued concerns about the strength of the U.S. dollar and inflation.
The market was pressured by weakness in retail stocks, amid news that Goldman Sachs downgraded Home Depot (HD) to in-line from outperform. Goldman lowered its view on hardline retail to cautious from neutral, and also downgraded shares of Federated Department Stores (FD) and May Department Stores (MAY).
Among other stocks on the move Tuesday, McDonald's (MCD) shares rose after the fast-food chain reported strong August same-store sales. Excluding the effect of foreign currency translation, the company posted 3.8% higher McDonald's same-store sales and 10% higher systemwide sales. CIBC World raised its third-quarter earnings estimate for McDonald's and maintains its sector outperform rating on the shares.
In health care, Alpharma (ALO) shares fell after the pharmaceuticals maker slashed its operating EPS forecast from 25 cents to 30 cents to 10 cents to 15 cents for the third quarter, from 50 cents to 55 cents to 40 cents to 45 cents for the fourth quarter, and to 90 cents to $1.00 for 2003.
Pharmaceutical Resources (PRX) shares surged after the company announced that a unit began shipping for immediate release a generic version of Paxil to U.S. customers. AG Edwards and CIBC World both upgraded the shares.
There is no major economic news set for release Wednesday. Key economic updates will not be available until Friday, when reports on retail sales, the University of Michigan's consumer sentiment index, and producer prices are due.
Treasuries closed higher in price Tuesday, as accelerating stock losses into the close helped offset temptation to make room for $29 billion in supply of new Treasury issues over the coming two sessions. Data played only a bit part, with the mixed weekly retail sales data ahead of the big August report on Friday. Wholesale trade data was also a footnote, though the inventory-to-sales ratio dropped back down to record lows of 1.21, which elevated hopes of inventory rebuilding in the coming quarters, says MMS International.
The sale of $16 billion in five-year notes and Treasury Secretary Snow's testimony about Fannie Mae and Freddie Mac will highlight Wednesday's session, according to MMS.
European stock markets finished lower Tuesday. London's Financial Times-Stock Exchange 100 index fell 28.2 points, or 0.66%, to 4,263.9. In Paris, the CAC 40 was down 34.46 points, or 1%, to 3,375.26. Germany's DAX index lost 47.13 points, or 1.3%, to 3,594.4.
Asian markets finished mixed. In Japan, the Nikkei 225 index jumped 238.28 points, or 2.23%, to a fresh 14-month high of 10,922.04. Tuesday's gains came following Wall Street's gains overnight and Morgan Stanley putting an "overweight" recommendation on Japan. Morgan Stanley's chief economist Stephen Roach reportedly predicted that the fair value of Japanese stocks should be approximately 10% above current prices. Big tech firms led the rally.
In Hong Kong, the Hang Seng index fell 118.46 points, or 1.06%, to 11,046.82.