Stocks ended lower Wednesday on news of disappointing earnings from Alcoa (AA) and a warning from Seagate Technology (STX). Reports of continued violence in Iraq also weighed on sentiment.
The Dow Jones industrial average fell 90.66 points, or 0.86%, to 10,480.15. The broader Standard & Poor's 500-stock index lost 7.65 points, or 0.67%, to 1,140.51. The tech-heavy Nasdaq composite index was down 9.66 points, or 0.47%, to 2,050.24.
Volume on the New York Stock Exchange was roughly 1.46 billion shares, while trading on the Nasdaq reached more than 1.77 billion shares.
From a technical standpoint, "the stock market is taking a much needed pause after the recent strong advance," says Mark Arbeter, chief technical analyst for Standard & Poor's. The major indexes had moved to overbought conditions and had risen into areas of pretty good, short-term chart resistance, he says. "I believe the pullback will be shallow on a price basis and limited in duration," he says.
An encouraging sign, Arbeter says, is the Nasdaq has outperformed the S&P 500 since the Nasdaq bottomed on Mar. 23. "The fact that funds are flowing back into the growth areas of the market and out of the more conservative areas is a positive."
While many sectors fell, oil stocks rose Wednesday on news from Iraq and a jump in oil prices following report of lower inventories. In the Iraq city of Fallujah, U.S. marines fired rockets that hit a mosque compound filled with people, killing as many as 40 people, according to the Associated Press.
Among other sectors, auto makers fell after the Wall Street Journal reported that Ford (F) is concerned about profitability given the weak dollar and continued price war in the U.S. Home entertainment software stocks declined after Merrill Lynch downgraded Electronic Arts (ERTS) on valuation.
Alcoa, the first Dow member to release March-quarter results, reported disappointing first-quarter earnings per share of 41 cents, vs. 17 cents a year ago, on an 11% sales rise.
General Electric (GE) and Rolls Royce were chosen by Boeing (BA) to develop and supply engines for its 7E7 Dreamliner jet, with orders of up to $60 billion, according to the Wall Street Journal. United Technologies (UTX) was informed by Boeing that Pratt & Whitney's PW-EXX engine was not selected to power the 7E7 Dreamliner.
In tech, Seagate Technology cut its third-quarter EPS forecast from the low end of a 20 cents to 30 cents range to 6 cents to 8 cents (excluding a previously disclosed $125 million income tax credit). It says demand is modestly weaker than normal seasonal patterns. JP Morgan reportedly downgraded the stock.
On Tuesday, a warning from Nokia (NOK) raised concerns about the strength of earnings in the tech and telecom sector.
Electronic Data Systems (EDS) says it closed first-quarter EPS with strong sales activity, signing about $1.3 billion in contracts globally during the last week of the quarter.
After the close of trading Wednesday, Internet media company Yahoo! (YHOO) posted first quarter net income of 14 cents per share (including one cent from a one-time gain), vs. 8 cents one year earlier. The company's revenues surged on strength in traditional online and Web-search advertising. It also announced a two-for-onestock split. The shares were solidly higher in after-hours trading Wednesday.
Thursday's earnings calendar includes General Electric (GE), Abbott Labs (ABT), and Rite Aid (RAD).
In merger news Wednesday, Kerr-McGee (KMG) agreed to acquire Westport Resources (WRC) in a $3.4 billion deal.
Lockheed Martin (LMT) amended its merger agreement with Titan Corp. (TTN). Titan shareholders will receive $20 in cash for each share held. If the merger is not completed by June 25, either Lockheed or Titan may terminate the agreement.
In economic news, export and import price index both rose 0.9% for March. The Mortgage Bankers Association's market index of mortgage applications fell 7.2% in week ended Apr. 2. Consumer credit use rose by $4.1 billion in February, following a $15.8 billion rise in January.
Economic reports coming Thursday include weekly jobless claims and wholesale inventories and sales for February.
Treasuries finished with small gains, as prices could not sustain the move up after the poor TIPS auction, says Informa Global Markets. The market opened higher, and had little reaction to the stronger import prices. A brief dip proved to be shallow as the situation in Iraq grew more tense.
European stock markets finished lower. London's Financial Times-Stock Exchange 100 index was down 4.1 points, or 0.09%, to 4,468.7, failing to sustain the day's meagre gains as trading soured on Wall Street. Sentiment took a hit from Nokia's profit warning yesterday, disappointing first-quarter numbers from Alcoa, and further fighting in Iraq.
Germany's DAX index was down 21.65 points, or 0.54%, to 4,001.16. DaimlerChrysler (DCX) fell despite reaffirming that it expects a slight improvement in earnings in 2004 and a clear improvement in 2005 and 2006.
In Paris, the CAC 40 index fell 11.55 points, or 0.31%, to 3,734.56.
Asian markets finished mixed on Wednesday. In Japan, the Nikkei 225 index fell 60.08 points, or 0.5%, to 12,019.62. The market fell after Nokia reported an unexpected drop in first-quarter sales that may limit earnings growth at suppliers such as TDK Corp. and Kyocera. Japanese banking and retail stocks gained after Moody's Investors Services raised the nation's foreign currency debt rating to Aaa, Moody's highest ranking.
In Hong Kong, the Hang Seng index gained 33.08 points, or 0.26%, to 12,920.05.