Intel Drags Down Tech Stocks

Updated from 4:18 p.m. EST

The market has been fickle for months, and that was the case again Wednesday before Wall Street's major averages finally ended lower, with technology shares bearing the brunt of the selling.

The Dow Jones Industrial Average closed down 34.95 points, or 0.28%, at 12,466.16, and the S&P 500 lost 7.75 points, or 0.56%, at 1373.20. The tech-heavy Nasdaq Composite was the weakest of the three, down 23 points, or 0.95%, to 2394.59.

Stocks visited both positive and negative territory, even in the final hour, as traders contemplated a host of news from the financial sector and another round of economic data, including the beige book from the Federal Reserve.

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Despite the decline, breadth and volume was fairly strong. On the New York Stock Exchange 5.34 billion shares changed hands, as advancers matched decliners. Volume on the Nasdaq reached 3.39 billion shares, with winners edging losers by an 8-to-7 margin.

"As much as investors would like to push stocks higher, this is a very skittish market," said Paul Nolte, director of investments with Hinsdale Associates. "We received good news from financials but investors are still not yet comfortable that other issues are behind us. The market is trying hard to rally, but the continued subprime issues are keeping a wet blanket on the stocks."

On the Dow, an advance in JPMorgan Chase (JPM Quote) provided an offset to disappointing numbers from semiconductor giant Intel (INTC Quote), though ultimately the bank couldn't prevent the index from finishing in the red.

Before the opening bell, JPMorgan said its fourth-quarter profit fell 34% from a year ago amid a $1.3 billion writedown tied to subprime mortgage losses. JPMorgan earned 86 cents a share, falling short of the Thomson First Call estimate.

Still, the results were much better than the broker's peers, and the writedown was lower than some on Wall Street expected. Its shares rose 5.8% to close at $41.43.

The Amex Securities Broker/Dealer Index was up 1.4% thanks to JPMorgan's gain. Among other financial winners, E*Trade Financial (ETFC Quote), Lehman Brothers (LEH Quote) and Goldman Sachs (GS Quote) were higher by 2.2% or more.

Other financial subsector indices also gained ground. The KBW Bank Index advanced 2.3%, and the Nasdaq Financial 100 Index tacked on 1.3%.

Elsewhere in the financial sector, shares of Ambac Financial (ABK Quote) slid 38.7% after the company slashed its dividend by 67% to 7 cents a share. Ambac also said that CEO Robert Genader would be leaving the firm and will be replaced by director Michael Callen. Ambac dropped $8.17 to $12.97.

Among other decliners in the group, fellow bond insurer MBIA (MBI Quote) tumbled 16.5%. Citigroup (C Quote) was off 2.6%, and TD Ameritrade (AMTD Quote) slipped 1.6%.

Overall though, the general strength in financials helped overcome a weak start for equities prompted by a slide in shares of Intel, who fell 12.4% to $19.88 after it gave a forecast that indicated first-quarter sales could come in below analysts' consensus target. The average estimate is $10 billion, but Intel is predicting between $9.4 billion and $10 billion.

Several other tech giants fell, as well. Apple (AAPL Quote), Cisco (CSCO Quote), SanDisk (SNDK Quote) and Nvidia (NVDA Quote) all ended lower by 2.7% or more.

"This is a standard start of earnings season, as people are digesting all the bad news," said Jason Pride, director of research with Haverford Investments. "Equities are relatively well-priced when compared to other asset classes."

Retail stocks, which have been among the most battered amid heavy shorting, helped to counterbalance bad news from the tech sector, with the S&P Retail Index rising 2.5%. Among individual names, Sears Holdings (SHLD Quote) jumped 4.9%, Lowe's (LOW Quote) added 4.5%, and Dow component Home Depot (HD Quote) climbed 3.8%.