Updated from 4:08 p.m. EDT
Stocks ended lower Tuesday following a late-afternoon slump in the tech sector and some disappointing data on consumer confidence and the manufacturing sector.
Dow Jones Industrial Average
closed down 105 points, or 1.1%, at 9275, while the
fell 38 points, or 2.1%, to 1787. The
finished down 11 points, or 1.1%, at 996.
Volume on the Nasdaq was 1.86 billion, while 1.51 billion trades exchanged hands on the
New York Stock Exchange
. Decliners narrowly beat advancers on the NYSE. Treasuries rallied, with the 10-year note gaining 1 6/32 to 102 19/32, yielding 3.93%.
People were protecting their gains ahead of earnings season, which resulted in the moderate selloff from Monday, said Jim Awad, market analyst at Awad Asset Management. The market had started to lose momentum lately anyway, he said, and the two negative economic reports added to the downward spiral.
The Conference Board said its September consumer confidence reading fell to 76.8 from last month's revised number of 81.7. The latest month's number fell short of analysts' consensus of 80.5. The news followed a downward revision to the University of Michigan's September consumer sentiment index last week.
Also, the Chicago Purchasing Managers Index fell to 51.2, down from August's 58.9. Analysts were expecting a reading of 57. Still, any reading above 50 signals manufacturing expansion.
"The numbers are the excuse for the market doing what it was going to do anyway," which is to consolidate, according to Larry Williams, the daytrader who wrote
The Right Stock at the Right Time
, one of the world's largest makers of computer workstations, said late Monday it will take a noncash charge of $1.051 billion for its previously reported June quarter, turning a break-even result into a loss of $1.039 billion, or 32 cents a share. The company also said it expects a wider loss for the September quarter. Merrill Lynch cut its fiscal 2004 revenue projection for the company, and the shares closed down 55 cents, or 14.3%, at $3.31.
The tech giant's investment rating also was cut to underperform from peer perform at Bear Stearns.
Awad noted that Sun's guidance was a surprise after several different companies had forecast positive earnings earlier this month, which had pushed up stock prices. "We had been seeing and believing fairly upbeat company data in anticipation that the data would be ratified by positive forward-looking guidance from other corporations," said Awad.
Among other tech stocks,
closed down 61 cents, or 3%, at $19.59 and
dropped 87 cents, or 8.8%, to $8.99.
On the earnings front,
Pepsi Bottling Group
reported a slight rise in quarterly profit amid weakness in its Mexican operations. Still, shares ended down 41 cents, or 1.9%, at $20.58.
dropped $1.70, or 30%, to close at $4, a day after it said third-quarter revenue will miss its target. The company was downgraded by CE Unterberg Towbin to market perform from strong buy. It was upgraded to overweight from equal weight by Lehman Brothers, however, which said Tuesday's weakness is a trading opportunity.
won a multibillion-dollar contract to provide infrastructure and software to KPN Mobile's 3G wireless network. Still, the company's shares ended down 9 cents, or 4%, at $2.16.
On a positive note, housing stocks had a strong day, with
gaining 80 cents, or 2.5%, to close at $33.11.
rose 48 cents, or 1.6%, to $30.42 and
gained 94 cents, or 1.2%, to $77.79.
Retailers were the focus of research notes at S.G. Cowen, which upgraded
to outperform from market perform. The firm believes Ann Taylor's improved product line will help it exceed earnings estimates, while Talbots is poised to see strong sales in the fourth quarter. Talbots closed up 76 cents, or 2.2%, at $34.85, while Ann Taylor rose $1.15, or 3.7%, to $32.14.
Also in analyst actions,
was upgraded at Morgan Stanley to overweight from equal weight on an expected stronger performance in the tax preparer's fiscal fourth quarter, with the help of effective marketing and focus on margins. Shares of the company ended up $1.10, or 2.6%, at $43.15.
Overseas markets ended mixed, with London's FTSE 100 closing down 1.2% at 4091 and Germany's Xetra DAX losing 2% to 3257. In Asia, Japan's Nikkei closed 0.1% lower at 10,219, while Hong Kong's Hang Seng rose 0.8% to 11,230.
Moving into the month of October on Wednesday and the start of earnings season, Awad said he believes investors are scared of losing the gains they already have. "I see day-by-day blocking and tacking as the market responds to each individual earnings report," he said. If earnings are more like Sun's negative preannouncement, then the gains will be coming down. Even if earnings are largely positive, Awad predicted that stocks will "limp through" to gains in the coming months.
Overall, Awad said traders are praying the market can stay somewhat strong through to the end of the year. "People need a positive calendar year after 2001 and 2002."