Stocks Sag on Earnings Weakness - TheStreet

Updated from 4:05 p.m. EDT

Stocks recorded small losses Wednesday, as positive earnings from

Intel

(INTC) - Get Report

were overshadowed by disappointing reports from

Lucent

(LU)

and

Motorola

(MOT)

, among others.

The

Dow Jones Industrial Average

ended down 34 points, or 0.4%, at 9094, and the

Nasdaq

fell 5 points, or 0.3%, to 1748. The

S&P 500

shed 6 points, or 0.6%, to 994. Stocks ended off their worst levels for the day.

"Even though

Intel's earnings were OK, they're not enough to carry the whole market," said Art Hogan, chief market analyst at Jefferies. "We've priced in perfection for this earnings season, so even if you get perfection,

people will sell on the news."

Hogan said investors are worried about the guidance that companies will provide over the next couple of weeks. "The economy may turn around in the second half, but it's still

not apparent yet," he said.

In the Treasury market, the 10-year note rose after tumbling earlier. The yield, which moves in the opposite direction to price, fell to 3.92%. Bonds declined sharply on Tuesday after

Fed

Chief Alan Greenspan said the central bank was unlikely to buy Treasuries to stave off inflation, something bond investors had thought was possible.

Greenspan's comments Wednesday had less impact on the market because his testimony before the U.S. Senate was identical to the speech he gave to the House on Tuesday. Still, in the ensuing question-and-answer period, he did say that ballooning budget deficits must be dealt with in order to maintain a healthy level of growth. If deficits aren't reduced by 2012, Greenspan hinted there could be potentially serious repercussions.

Helping to offset some of the damage in the broader market Wednesday was a 5% rise in shares of Intel. The chip giant doubled its profit in the second quarter, beating Wall Street's expectations. It also issued guidance in line with estimates and predicted higher profit margins in 2003. Shares were up $1.24, or 5%, at $25.31.

Telecom-equipment giant Lucent was a big drag, however, after saying late Tuesday that it wouldn't meet profit projections for the current fiscal year in light of weakness in the wireless market. Lucent also expects losses to be wider than analysts' targets in the third quarter and said it wouldn't reach profitability until sometime in fiscal 2004. Shares were down 24 cents, or 12.5%, at $1.68.

In other earnings, Motorola posted a second-quarter profit that beat analysts' estimates, but on weaker sales. The company also lowered third-quarter expectations. US Bancorp Piper Jaffray and RBC Capital Markets both downgraded the company. Shares were off 45 cents, or 4.6%, at $9.33.

Ford

posted a 27% drop in second-quarter earnings and said it sold 7.4% fewer vehicles in the quarter. Shares were down 65 cents, or 5.6%, at $10.99.

Dow component

Citigroup

(C) - Get Report

weighed on the blue-chip index after its chief executive, Sandy Weill, said he would step down by year's end and turn the office over to Charles O. Prince. Shares were down $1.31, or 3%, at $45.52.

Still,

Sears

(S) - Get Report

was up after the retailer said it will sell its credit card operation to Citigroup for about $3 billion in cash. Sears was up $3.22, or 9%, at $38.20.

In other earnings news,

J.P. Morgan Chase

(JPM) - Get Report

said second-quarter earnings rose 78%, beating analysts' estimates. Nonetheless, the stock was down $1.04, or 2.8%, at $36.25.

The U.S. House Financial Services capital markets subcommittee postponed a hearing on mortgage finance companies

Fannie Mae

(FNM)

and

Freddie Mac

, citing a lack of cooperation from the two firms. Fannie Mae was down 6 cents, or 0.1%, at $69.00, and Freddie was down 28 cents, or 0.5%, at $53.30.

On the research front, Thomas Weisel downgraded

Pfizer

(PFE) - Get Report

, citing competitive treats to the company's brands including Lipitor and Viagra. But the firm upgraded shares of

Johnson & Johnson

(JNJ) - Get Report

, saying the firm's risk profile had improved. Banc of America lowered its rating on JNJ, however.

SG Cowen raised its third-quarter profit estimate on

McDonald's

(MCD) - Get Report

, reflecting strong U.S. sales trends.

Among economic data, the consumer price index rose 0.2% in June, in line with estimates. The core CPI, which excludes food and energy, stayed unchanged, while economists expected a 0.1% rise after the figure climbed 0.3% the previous month. Business inventories for May fell 0.2%, following a flat June. Meanwhile, industrial production rose 0.1% last month, and the capacity utilization rate held steady at 74.3%. Both numbers were in line with analysts' estimates.

Overseas markets were mixed, with London's FTSE 100 down 0.6% at 4077 and Germany's Xetra DAX up 0.09% at 3387. In Asia, Japan's Nikkei fell 0.2% to 9735, while Hong Kong's Hang Seng rose 0.7% to 10,207.

Crude oil for future delivery was lower in New York. The dollar was higher vs. the yen and lower against the euro.

On Tuesday, the Dow ended down 48 points, or 0.5%, at 9128, while the Nasdaq Composite fell 1 point, or 0.1%, to 1753. The S&P 500 shed 3 points, or 0.3%, to 1000.