Stocks Finish Broadly Lower on Intel Report

Stocks closed broadly but modestly lower Wednesday in the wake of computer chip giant Intel’s disappointing third-quarter earnings report, released late Tuesday.

But optimism over airline company earnings sent the Dow Jones transportation index to a record high.

In the broad market, losers topped winners by 24 to 19 on Nasdaq and by 17 to 12 on the New York Stock Exchange, as some investors seized on the Intel news as an excuse to take profits.

But the damage to most stock indexes was minimal. The Dow Jones industrials lost 38.31 points to 8,057.98, a 0.5% decline.

And the Nasdaq composite index, heavy with tech issues (including Intel), was off 9.42 points to 1,723.37, also roughly a 0.5% drop.

Despite the relatively modest declines in the indexes, analysts noted that investors were chiseling away even at some stocks whose companies met or beat earnings expectations.

BankAmerica, for example, slightly topped analysts’ estimates with its third-quarter report, but the stock still fell $1.50 to $76.19, and now is 6% below its recent record high of $81.25.

“Investors are getting used to earnings topping expectations, and the unexpected now is perhaps when a company meets expectations,” said Timothy Morris, co-chief investment officer at Bessemer Trust Co. “Plus, we’ve rallied the last couple of weeks, so when the earnings come out, short-term traders take their profits.”

“We have continued uncertainty about earnings after Intel,” said Scott Bleier, chief market strategist at Prime Charter Limited. “We are on a cusp right now. We have had this ‘Goldilocks economy,’ but people are on the fence about what lies ahead.”

Intel, for example, not only missed analysts’ earnings estimates by 3 cents a share--earning 88 cents in the quarter ended Sept. 30, up 19% from a year earlier--but also cautioned that its fourth-quarter results won’t improve much from the third quarter.

Intel shares dove $5.13, or 5.6%, to $86.69 on massive trading volume of 66 million shares on Nasdaq. The stock is down 15% from its recent record high of $102.

The bond market didn’t help stocks Wednesday, as yields edged higher. The yield on the 30-year Treasury bond rose to 6.39% from Tuesday’s close of 6.35%.

Bonds were pressured by a report showing unexpectedly strong retail sales in September, which raised the specter of higher interest rates down the road.

“I don’t think we’ll see the economy slow down anytime soon,” said Nicholas Walsh, who manages about $800 million in bonds for J&W; Seligman.

Still, in the stock market, analysts said the surprise Wednesday was that the selling wasn’t worse, given Intel’s bellwether status.

“I was really impressed, considering Intel and the strong retail sales. We could have been down 100 points or more” on the Dow, said Charles Payne of Wall Street Strategies.

Among Wednesday’s highlights:

* Tech shares following Intel lower included Motorola, down $2.06 to $70.50; LSI Logic, down $2.25 to $27; IBM, down $1.63 to $101.69; and Cypress Semiconductor, down $1.19 to $12.94.

But others bucked the trend. Compaq jumped $3.63 to $77.25, and Dell surged $3.88 to $102.88.

* Other stocks reacting to earnings reports included Ford Motor, down 44 cents to $49.13; Caterpillar, down 75 cents to $60; Charles Schwab, up 19 cents to $36.50; and clothing maker VF Corp., up $1.63 to $91.75.

* Airline stocks soared amid rising optimism about their earnings, as AMR, parent of American Airlines, reported better-than-expected earnings. AMR gained 94 cents to $119, Delta jumped $2.31 to $106.94 and US Airways surged $1.63 to $49.44.

The Dow transports index, boosted by airlines, jumped 1.3% to a record 3,359.27.