Stocks fall after early gains
Stocks retreated from lofty heights Thursday after a major Wall Street bank lowered its estimate of sales by a highflying Chinese Internet company and a European monetary official voiced concern about inflation.
The news caused traders to take profits, particularly in the technology sector, from big gains made earlier in the session after Wal-Mart Stores lifted its profit forecast. The Dow Jones industrial average and the Standard & Poor’s 500 index were at record levels before the market’s about-face.
The reversal came after JPMorgan Chase & Co. lowered its revenue estimate for China’s Baidu.com. That pulled down technology shares, which had been rising strongly in recent days.
“Stocks have come a long way really quickly,” said Kelmoore Strategy Funds portfolio manager Matt Kelmon.
“The stocks that have done the best are getting hammered right now.”
Also hurting stocks were remarks by a member of the European Central Bank’s governing council, who said rising inflation in the euro zone might require higher interest rates. The comments appeared to raise concerns on Wall Street that European growth could slow and that inflation in the U.S. could prevent the Federal Reserve from making another rate cut.
Many investors have been betting on further easing by the Fed, which lowered its benchmark rate by half a percentage point Sept. 18 in response to a tightening in the credit markets.
The Dow closed down 63.57 points, or 0.5%, at 14,015.12 after marking a trading high of 14,198.10.
Broader stock indicators also turned lower after giving back robust gains. The Standard & Poor’s 500 index fell 8.06 points, or 0.5%, to 1,554.41 after setting a trading high of 1,576.09.
The tech-dominated Nasdaq composite index, which has touched nearly seven-year highs in recent sessions, fell 39.41 points, or 1.4%, to 2,772.20. The Russell 2,000 index of smaller-company stocks fell 10.21 points, or 1.2%, to 834.98.
The Nasdaq was hurt by the report on Baidu, whose U.S.-traded stock tumbled $34.39, or 10%, to $308.78. Shares of U.S.-based tech companies also fell.
Amazon.com sank $5.32, or 5.6%, to $89.34. Apple fell $4.56, or 2.7%, to $162.23, trimming its advance for the year to 91%. Yahoo slid 71 cents, or 2.5%, to $27.65. Oracle dropped 46 cents, or 2%, to $22.46. Google, which climbed above $600 for the first time this week, retreated $3.39 to $622.
“It was all triggered with that JPMorgan call,” said Clarence Woods Jr., chief equity trader with MTB Investment Advisors. “You’ve had such a straight up run here in the last two weeks in the tech area. Everyone was waiting for someone to blink and when they did people decided to sell and take their profits.”
Decliners outnumbered advancers by about 5 to 3 on the New York Stock Exchange.
Bond yields moved little. The yield on the benchmark 10-year Treasury note fell to 4.64% from 4.65% late Wednesday.
Surging gold and oil prices heightened some investors’ worries about inflation. Crude futures climbed $1.78 to $83.08 a barrel on the New York Mercantile Exchange after the government reported an unexpected drop in inventories of crude. The dollar fell against the euro and was unchanged against the yen.
Investors appear split on whether the Fed will lower rates.
“You kind of have to wait and see,” said Stephen Carl, principal and head of equity trading at Williams Capital Group. He noted that some data, particularly weak retail sales reports that came out Thursday morning, showed that the economy could be in need of further easing. “The potential is definitely there.”
Other reports have shown economic strength, however. The government reported Thursday that the U.S. trade deficit shrank in August to its smallest size in seven months -- a much better reading than Wall Street expected -- amid record sales of American products.
Some retailers, including Target, Nordstrom and J.C. Penney, on Thursday cut their profit projections for the quarter or the year, sending an index of retail stocks in the S&P; 500 down 1.3%.
Target fell $1.15, or 1.7%, to $64.62. Penney slumped $4.73, or 7%, to $63.27. Nordstrom tumbled $3.64, or 7.5%, to $44.97.
But Wal-Mart jumped $1.31, or 2.9%, to $46.90 after the world’s largest retailer raised its profit forecast for its current fiscal quarter even after reporting that sales at stores open at least a year rose a weaker-than-expected 1.4% in September.
In other market highlights:
* The biggest gainer in the Dow was General Motors, which rose $1.86, or 4.9%, to $39.99 after union members ratified a new contract with the automaker. Rival Ford Motor jumped 53 cents, or 6.4%, to $8.76, for the biggest gain in the S&P; 500.
* Fastenal plunged $5.04, or 10%, to $44.25 after the largest U.S. retailer of nuts, bolts and other fasteners posted a smaller third-quarter profit than expected.
* In Japan, the Nikkei stock average jumped 1.6% after a bond-rating firm upgraded the country’s debt. In Europe, key stock indexes rose 1.4% in Britain, 0.6% in Germany and 0.4% in France.
