Wednesday's Market: Stocks Surrender as Investors Get Spooked by Corporate America

The pullback, fueled in part by warnings from H-P and J.P. Morgan Chase, ended four days of gains. Now, all eyes are on Intel.
By Diane Hess ,

(Updated from 4:18 p.m.)

In search of a green light, the market got a red signal today.

The latest word from corporate America, a warning from

Hewlett-Packard

(HWP)

about a global slowdown in information technology and an alert from

J.P. Morgan Chase

(JPM) - Get Report

about lower trading revenues, had investors wondering if the worst is over.

In lackluster trading, the major indices succumbed to the negative commentary. After trading up on each of the past four days, the

Nasdaq Composite closed down 15.9 points, or 0.7%, to 2217.7. It is still ahead 3.2% for the week and 35.3% off its low of 1638.8, reached on April 4. But it's 56.1% off its record close of 5048.62 hit last March.

The

Dow Jones Industrial Average fell 105.60 points, or 0.9%, to 11,070.24. Since touching a March 22 low of 9,389.48, the blue-chip index is up 17.9% and only 5.6% off its all-time high of 11,722.98 reached in January 2000. Weakness in Hewlett-Packard and J.P. Morgan, the sponsors of today's confessional, weighed on the index. H-P shed 3.8% to $28.92, while J.P. Morgan dropped 4.2% to $46.47.

Second-quarter preannouncement season, when companies offer guidance on how things are shaking out, kicked off last week, but is just now heading into high gear. "At the start of the season,

cautious comments -- one from a tech company and one from a financial company -- will upset the apple cart," said Peter Coolidge, managing director of trading at

Brean Murray Foster Securities

. "Today's news doesn't set a good precedent for what might be doled out over the next couple of weeks."

Earlier, Hewlett-Packard warned that weakness in Latin America and Asia were making the company "more cautious" about its prior sales guidance for the third quarter, but added that cost controls will "increase the probability" it will meet earnings estimates. Separately, J.P. Morgan said that it expects trading revenues in each of the remaining quarters this year to be lower than first-quarter results, because of poor market conditions.

Betting on an improvement in the business outlook, investors bid stocks higher over the past four sessions. Since last Tuesday, when

Sun Microsystems

(SUNW) - Get Report

cautioned it would miss second-quarter performance targets, there have been positive affirmations from companies, such as chipmaker

Xilinx

(XLNX) - Get Report

and telecommunications equipment provider

Lucent

(LU)

.

As for the recent rally, traders say it lacked conviction. "Stocks were marked up on light volume," said Bob Basel, director of listed trading at

Salomon Smith Barney

. "So, it's easy to see them come back a bit." On Monday, the

New York Stock Exchange registered its second-lightest volume day this year.

All Eyes Are on Intel

The market awaits word from Intel about its earnings. This morning,

Credit Suisse First Boston's

Charles Glavin said he expects the company will again lower guidance. The report follows similar comments made last week by Lehman's

Dan Niles and

Morgan Stanley's

Mark Edelstone. Intel was lately up 1.7% to $30.24, but the

Philadelphia Stock Exchange Semiconductor Index

was off 0.3%.

Ahead of

Intel's

(INTC) - Get Report

midquarter update with analysts tomorrow, investors did not make too many bets today. "Big announcements tend to keep people on the sidelines," added Basel.

In positive action today, Sun gained 3.5% to $17.61, after

Goldman Sachs

offered some cautiously optimistic commentary on the company. In a research note today, Laura Conigliaro, whose bearish comments preceded Sun's warning last week, said the worst effects of Sun's "missteps" were over and that U.S. business was stabilizing, with a slight uptick.

Elsewhere,

priceline.com

(PCLN)

soared 30% to $7.06 on news that

Cheung Kong Holdings

and

Hutchison Whampoa

are purchasing 25 million shares of the company from founder Jay Walker and his trust. Cheung Kong and Hutchison are both controlled by Hong Kong's wealthiest man, Li Ka-Shing.

Crude oil and gasoline prices fell today after the

American Petroleum Institute

report showed higher-than-expected inventory levels. Crude oil inventories rose 3.4 million barrels, or 1%, vs. expectations they would fall by 2 million barrels. The

Chicago Board of Options Exchange Oil Index

fell 2.6%.

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Market Internals

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Most Active Stocks

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International

European markets traded lower today, while Asian markets closed overnight mixed. The

FTSE 100

fell 21 to 5902. The Paris

CAC-40

shed 20 to 5947 and the German

Xetra Dax

lost 49.7 to 6192.4.

The euro was lately trading lower at $0.8513. The dollar was trading at 120.50 yen.

Tokyo's

Nikkei 225

ended off 0.1%, while Hong Kong's

Hang Seng

closed up 0.92%.

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