Negative News Trumps Positive on Wall Street
Stocks were mostly lower Wednesday as a worrisome combination -- lower-than-expected retail sales, rising oil prices and a disappointing forecast from Intel -- offset upbeat earnings news from McDonald’s and other companies.
A string of profit warnings from technology companies have worried the equity markets for more than a week, and the picture only looked bleaker after chip bellwether Intel released its second-quarter results late Tuesday.
The market’s tone seemed to temporarily improve Wednesday after McDonald’s midday announcement, but the advance was short-lived.
Still, some analysts said the losses in most market indexes were surprisingly modest given the day’s news.
The Dow Jones industrial average dipped 38.79 points, or 0.4%, to 10,208.80.
The Standard & Poor’s 500 index was down 3.67 points, or 0.3%, at 1,111.47.
Declining issues narrowly outnumbered advancers on the New York Stock Exchange.
The tech-dominated Nasdaq composite index bore the brunt of the day’s losses, falling 16.78 points, or 0.9%, to 1,914.88, its lowest close since May 21.
Intel sank $2.76, or 11%, to $23.38, and dragged the chip sector down in the wake of its warning that 2004 profit margins would be lower than expected because of an inventory buildup.
The so-called SOX index of major chips stocks slumped 4.5% to its lowest close since Sept. 30, with all 18 companies in the index declining. The benchmark is down 17% this year.
That bearish sentiment was bolstered by a Commerce Department report showing retail sales falling 1.1% in June, the sharpest decline in 16 months. Economists blamed bad weather, higher energy prices and slower payroll growth. The pullback followed a 1.4% rise in May.
Also, oil prices hit a six-week high of $40.97 a barrel, raising concern that higher fuel costs would further curb spending by consumers and companies.
Many market participants had hoped second-quarter results would help stocks break out of the tight trading range they’ve been mired in, but a steady march of earnings shortfalls and profit warnings have dampened investor enthusiasm.
Some analysts say investors are paying too much attention to downbeat reports and not enough to good news, such as McDonald’s reporting that June sales growth at its restaurants around the world would help it beat Wall Street’s earnings estimates for the quarter.
The stock, one of the 30 Dow issues, jumped $1.11 to $27.79.
Among Wednesday’s market highlights:
* A disappointing financial forecast from medical equipment maker Varian Associates sent its shares down $8.27 to $67.12. Data-storage-equipment firm Imation slid $8.32 to $32 after its second-quarter results missed expectations.
* On the upside, Yum Brands, parent of the KFC, Pizza Hut and Taco Bell fast-food chains, gained 94 cents to $37.95 after reporting higher quarterly earnings and a stronger outlook.
Also Harley-Davidson jumped $3.35 to $62.95. The largest U.S. motorcycle maker said second-quarter profit rose to 83 cents a share, topping the 75-cent analyst estimate in a Thomson First Call survey. Harley said it earned more on loans to customers and spent less on marketing.
* Juniper Networks added $2.59, or 12%, to $24.59 after the network-equipment maker said it expected third-quarter earnings and revenue to come in ahead of analysts’ estimates.
* Genzyme gained $5.50, or 12%, to $50 after the biotech firm reported a 58% surge in second-quarter revenue and projected higher annual sales.
* Bank of America lost 83 cents to $84.30 after blowing past earnings expectations, buoyed by results from recently acquired FleetBoston Financial. But some analysts questioned the quality of its earnings, noting that a significant portion was because of securities gains instead of the bank’s primary business.
* Higher oil prices boosted energy companies. ChevronTexaco added 77 cents to $94.75, and Halliburton gained 87 cents to $30.51.
* Harrah’s Entertainment fell $1, to $50.98, on reports that it was close to an acquisition of rival Caesars Entertainment. Caesars was up $2.08, to $16.
* Treasuries were little changed as investors said they wanted more evidence of a slowing economy before changing their bets. The yield on the benchmark 10-year note rose to 4.48% from 4.47% Tuesday.
