The Dow Jones industrial average fell 86.8 points, or 0.84%, to 10,231.36. The broader Standard & Poor's 500 index was down 7.96 points, or 0.71%, to 1,120.37. The Nasdaq composite index lost 18.88 points, or 0.99%, to 1,896.52.
In the energy markets, oil prices ended lower in a volatile session. The October crude oil contract on Nymex spiked as high as $45.30 on the back of a much larger than expected draw in weekly crude supplies, but then ultimately settled down 78 cents to $43.61. The EIA indicated there would be little disruption in Gulf of Mexico supplies once Hurricane Ivan clears out by the end of the week, which apparently was the catalyst for a rather heavy bout of profit taking, says Action Economics. Meanwhile, OPEC announced at its meeting in Vienna that it agreed to boost oil output.
The main economic report Thursday is the August consumer price index. Action Economics expects the CPI to rise 0.2% for both the overall index and the core which excludes food and energy prices (median +0.2% for both). While the surge in oil prices on the month will provide a lift to the energy aggregate, the bigger story will be how little of a translation there was to retail gas prices, which likely fell on the month, says Action Economics. "Overall, this report is expect to support our view that the peak of the inflation acceleration is behind us," says Action Economics.
Also coming out are weekly jobless claims and the Philadelphia Fed index.
Companies on Thursday's earnings calendar include 3Com (COMS
), Tektronix (TEK
), and Verity (VRTS
There was plenty of news to move stocks on Wednesday. Martha Stewart announced that she wants to serve her sentence of five months of jail and five months of house arrest instead of waiting for the appeal process. Stewart said she wants to reclaim her good name and her personal and professional life. Shares of Martha Stewart Living Omnimedia (MSO
Earnings warnings continued to flow in Wednesday. Dow component Coca-Cola (KO
) says unfavorable operating conditions in its key markets are hurting earnings. The soft drink maker says third-quarter worldwide unit case volume growth is expected to be flat to up 1%. It sees third-quarter earnings per share of 35 cents to 38 cents, including impairment charges.
) says that due to lower-than-anticipated revenues in publishing and broadcasting, it sees third-quarter EPS of 49 cents to 51 cents.
In the tech sector, Xilinx (XLNX
) says it sees a 5% to 7% sequential revenue decline for the second quarter, vs. its previous guidance for a 2% to 4% revenue rise. The programmable logic devices maker expects 64% gross margin, vs. prior forecast of 65%. This could dampen the positive sentiment for semiconductors after the recent run-up, says Standard & Poor's MarketScope.
After the market close Tuesday, Oracle (ORCL
) reported first-quarter earnings per share of 10 cents, vs. 8 cents one year earlier, a penny above the Wall Street consensus estimate. The database software outfit said revenues rose 7%, citing continued growth of its Oracle 10g product. The shares rose.
Best Buy (BBY
) reported second-quarter EPS from continuing operations of 46 cents, vs. 42 cents a year ago, on a 13% revenue rise. The electronics retailer sees third-quarter EPS from continuing operations of 41 cents to 47 cents, driven by 3% to 5% same-store sales gain. It reiterated $2.80 to $2.93 fiscal year 2005 EPS guidance. The shares gained ground.
In merger news, PacifiCare Health Systems (PHS
) agreed to acquire American Medical Security (AMZ
) for $32.75 per share in cash, in a $502 million deal. Separately, PacifiCare raised its $350 million to $360 million 2005 net income guidance to $360 million to $375 million.
A few positive economic reports were released Wednesday. U.S. business inventories rose 0.9% in July after a revised 1.1% gain in June (up 0.9% previously), above expectations. Sales rose 0.6%, after a revised 0.2% increase in June (up 0.1% prior). "We suspect desire to restock shelves will remain supportive for GDP growth over the second half of the year," says economic research outfit Action Economics.
New York Fed's Empire State index rebounded to 28.34 in September after plunging over 22 points in August to a revised 13.22 (12.57 previously). The data were well above expectations. New orders jumped, the number of employees rose, prices paid edged up, and the 6-month outlook climbed. "The data support our contention that the slowdown in August was merely noise and that growth in this region continues apace," says Action Economics.
However, industrial production figures were weaker than expected. Industrial production rose a tepid 0.1% in August, after a revised 0.6% increase in July (up 0.4% previously). This boosted capacity utilization to 77.3% from a revised 77.3% in July (77.1% prior). The data for August appear to have been significantly impacted by the first of the Florida hurricanes, says Action Economics. The small 0.1% overall gain was held back by a 2.4% drop in utility output and a 1.1% drop in mining activity, the first of which was depressed by both the hurricane and generally cool weather, says Action Economics.
Treasuries finished lower in price, after the New York Fed index recovered from some past weakness with a 28.3 print for September. With the exception of industrial production, the other indicators were also relatively positive, though the market lacked follow-through ahead of the CPI report on Thursday, says Action Economics. The 10-year note yield jumped from the 4.13% area to 4.17%.
European stock markets finished mixed on Wednesday. London's Financial Times-Stock Exchange 100 index was up 2.8 points, or 0.06%, to 4,548.4 even though Britian's average earnings fell to an eight-month low of 3.8% in the three months to July from 4.3% in the June period.
Germany's DAX index fell 6 points, or 0.15%, to 3,941.75 amid a report that labor costs in the dozen nations sharing the euro grew slower than expected in the second quarter as high unemployment prevented workers from pushing through increases that could fuel inflation. In Paris, the CAC 40 index lost 16.18 points, or 0.44%, to 3,691.85.
In Asia, the markets finished lower on Wednesday following an almost flat close on Wall Street overnight, with tech stocks taking a beating after recent gains. Japan's Nikkei 225 index fell 137 points, or 1.21%, to 11,158.58. In Hong Kong, the Hang Seng index lost 63.66 points, or 0.48%, to finish at 13,084.4, with utilities, properties, and conglomerates leading the losses.