Intel’s Spending Forecast Pulls Down Stocks
Stocks slumped Wednesday after a lackluster capital spending forecast from technology bellwether Intel disappointed investors looking for signs that corporate America’s profit picture is improving.
Downbeat outlooks from DuPont, the No. 1 U.S. chemical company, and Automatic Data Processing, the top U.S. payroll services company, exacerbated investors’ concerns.
Intel, which serves as a barometer for the battered chip industry, after Tuesday’s close posted quarterly earnings that more than doubled. But the world’s No. 1 maker of computer chips said it plans to cut capital expenditures for 2003 by as much as 25% and forecast lower first-quarter revenue.
“There was some buildup coming into the Intel news that maybe the market would hear more about a turn, which doesn’t seem to have come,” said Rick Meckler, president of investment company LibertyView. Worries about the potential for “a whole range of disappointments have people a little nervous.”
The technology-laden Nasdaq composite index dropped 22.19 points, or 1.5%, to 1,438.80. The Dow Jones industrial average fell 119.44 points, or 1.4%, to 8,723.18, and the Standard & Poor’s 500 index shed 13.44 points, or 1.4%, to 918.22.
Losers outnumbered winners by about 3 to 2 on the New York Stock Exchange and Nasdaq. Trading was moderate.
On the economic front, weakness in a key inflation gauge spurred concerns that a lack of pricing power could hinder any rebound in corporate profits, and the Federal Reserve’s closely watched “beige book” report suggested that the U.S. economy’s sluggishness continued into early January.
Surging oil prices gave investors another cause for concern as crude oil prices rose for a third day. In New York trading, the price of crude gained 84 cents to a new two-year high of $33.21 a barrel on jitters about a possible U.S. war with Iraq and worries about low supplies.
The quarterly earnings reporting season kicked into higher gear this week and investors were hoping for signs of solid growth.
Computer maker Apple Computer, off 18 cents at $14.43, and Internet media company Yahoo, down 12 cents at $19.58, were set to post their earnings after the closing bell. Both stocks fell in after-hours trading after Yahoo reported disappointing results and Apple met, but didn’t exceed, Wall Street’s expectations.
During regular trading, Intel shed 44 cents to $17.35. The chip giant’s capital spending outlook slammed semiconductor equipment makers. The $19-billion chip gear industry was hoping Intel’s capital spending budget would offer evidence that 2003 would mark a recovery from its worst downturn ever.
Novellus Systems fell 70 cents to $32.75, Applied Materials slumped 91 cents to $14.45, KLA Tencor fell $1.20 to $38.45 and Teradyne sank $2.49 to $12.99.
In other highlights:
* Rising crude prices boosted oilfield service stocks. Halliburton added 9 cents to $18.99, Schlumberger gained 43 cents to $41.30 and the Philadelphia index of 15 oilfield service stocks rose 2%.
* DuPont fell $1.50 to $42.50. The Dow member warned of disappointing fourth-quarter earnings as it struggles with higher energy costs and weak demand.
* Automatic Data Processing tumbled $3.17 to $36.31. The company said its quarterly profit fell slightly and it cut its 2003 growth estimates because of declining revenue in its brokerage services division.
* Transkaryotic Therapies surrendered $2.25, or 26%, to $6.49. The company failed to convince a U.S. advisory panel that data showed its drug Replagal probably would benefit patients with a rare genetic disorder called Fabry Disease.
Market Roundup, C5-6
