Markets & Finance

Stocks Finish Lower


Stocks fell on Wednesday amid worries about earnings, as investors were disappointed with quarterly revenue from Apple Computer (AAPL) and results from Advanced Micro Devices' (AMD). Plus, a jump in Treasury yields stoked inflation and rate concerns, says Standard & Poor's MarketScope.

The Dow Jones industrial average fell 36.26 points, or 0.35%, to 10,216.91. The broader Standard & Poor's 500 index was down 7.19 points, or 0.61%, to 1,177.68. The tech-heavy Nasdaq composite index dropped 23.62 points, or 1.15%, to 2,037.47.

November West Texas Intermediate crude oil rose 59 cents to $64.12 a barrel. Crude gains were largely the result of recent reports from both the IEA and EIA, which raised demand growth forecasts for 2006, says Action Economics.

Coming Thursday is an update on the trade deficit, which is expected to widen to a $59.5 billion for August, compared to July's level of $57.9 billion. Imports are expected to rise 2.7%, boosted by the surge in oil prices. Exports are projected to increase 0.8%. "Port data, ISM data, and custom receipts suggests trade-related activity remains mixed, although Katrina could prompt a large distortion to both exports and imports in September," says Action Economics.

On Wednesday, Federal Reserve Chairman Alan Greenspan spoke about economic flexibility in Washington, D.C. Greenspan lauded the free market paradigm and said U.S. "economic flexibility" makes the economy more resilient to shocks, and helped the U.S. weather such things such as terrorism, hurricanes, and the surge in oil prices, reports Action Economics. This text was largely a repeat of his Sept. 27 NABE text, as suspected, says Action Economics.

No major economic reports were released today.

Google (GOOG) and Comcast (CMCSK) are in serious discussions with Time Warner (TWX) about buying a minority stake in America Online, according to The Wall Street Journal.

In earnings news, Apple Computer (AAPL) posted fourth-quarter earnings per share of 50 cents, vs. 13 cents a year ago (GAAP), on a 57% revenue rise. The PC maker sees $4.7 billion in first-quarter sales and GAAP EPS of about 46 cents. S&P says fourth-quarter iPod and desktops were below its model, and the projected first-quarter sales deceleration is concerning.

Separately, Apple unveiled its video iPod and will sell ABC-TV shows on its iTunes site.

Advanced Micro Devices (AMD) reported third-quarter EPS of 18 cents, vs. 12 cents, on a 23% sales rise. The company expects fourth-quarter microprocessor sales to grow 7%-13% sequentially.

Also in tech, Prudential downgraded Intel (INTC).

Harley-Davidson (HDI) posted third-quarter EPS of 96 cents, vs. 77 cents, on a 10% revenue rise. The motorcycle maker sees 5%-9% long-term annual wholesale unit growth and annual EPS growth of 11%-17%.

Pfizer (PFE) shares rose on reports that a Britain court decision stopped the early launch of generic Lipitor.

Treasury Market

Treasury yields spiked, as the 10-year note climbed to 4.44%. The overhang of bearish sentiment contributed to the rebound in yields to probe 6-month highs, though the encore presentation by Greenspan on "economic flexibility" contributed little other than some intraday chop to the equation, reports Action Economics.

World Markets

European stock markets were trading lower on Wednesday. London's Financial Times-Stock Exchange 100 index was down 18.5 points, or 0.34%, to 5,362.2.

Germany's DAX index fell 39.38 points, or 0.78%, to 4,993.08. In Paris, the CAC 40 index lost 23.27 points, or 0.51%, to 4,526.41.

In Asia, the markets finished lower on Wednesday. Japan's Nikkei 225 index fell 92.97 points, or 0.69%, to 13,463.74. Shares of companies that derive earnings from the domestic economy, such as those in the real estate industry, rose, while exporters suffered losses.

In Hong Kong, the Hang Seng index dropped 343.75 points, or 2.17%, to 14,575.02 partly due to concerns about the U.S. Federal Reserve's course for more rate hikes after the release of the Sept. 20 FOMC meeting notes yesterday. Rates in Hong Kong generally keep pace with the U.S. since the local currency is pegged to the U.S. dollar, says Standard & Poor's MarketScope.


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