Updated from 4:09 p.m. EDTStocks plunged Wednesday afternoon, with the Nasdaq hitting a new low for 2004, as skepticism about the pace of earnings growth for the rest of the year overshadowed good news in the present, despite an initial charge from Fed Chairman Alan Greenspan's upbeat congressional testimony and Microsoft's ( MSFT) plan to return $75 billion to shareholders. The tech-heavy Nasdaq set a new low for the year, down 42.70, or 2.23%, to 1874.37. It was weighed down by a 3.7% drop in the Philadelphia Semiconductor Index. The Nasdaq's previous low was 1876, set in mid-May. The Dow Jones Industrial Average dropped to its lowest close since mid-May, down 102.94 points, or 1.01%, to 10,046.13, after being as high as 10,237 in the morning. All but four of the 30 components of the index were in the red, with the only support coming from Microsoft, United Technologies ( UTX), Honeywell ( HON) and J.P. Morgan ( JPM). Meanwhile, the S&P 500 also took out its recent lows and fell below its 1100 mark for the first time since May, down 14.79 points, or 1.33%, to 1093.88. In other markets, the 10-year Treasury note was down 6/32 to yield 4.47%, while the dollar climbed against the yen and the euro. In New York, crude oil for August delivery was down a penny to $40.57. "Anytime you close below an annual low on big volume, it's a big disappointment, and I would think that suggests that we've got some more work to do on the downside," said Joe DeMarco, head trader with HSBC Management. "There doesn't seem to be any specific catalyst except for the market's inability to respond well to good earnings and good guidance. We seemed to brush that stuff off, so that means there's concern about the fact that earnings growth is decelerating."
Trading volumes sent a foreboding message to investors, dwarfing that of the previous session's rally, with nearly 1.7 billion shares trading on the New York Stock Exchange. On the Nasdaq, almost 2.1 billion shares changed hands, and decliners held about a 7-to-2 majority on both exchanges. Adolfo Rueda, senior technical analyst with Shields & Co., was skeptical of what he called the "anemic bounce" in the stock market over the past two days. Still, he said, "it's disappointing that we've given all that up today after getting some decent news from a few Dow components. "The reason why I didn't think this recent bounce meant anything is lack of volume," Rueda added. Investors were inundated with news Wednesday on one of the busiest days of the second-quarter earnings season. Microsoft traded up 54 cents, or 1.9%, to $28.86 having disclosed a plan Tuesday night to pay shareholders a $3 special dividend and buy back $30 billion of stock over four years. Stocks also got an early boost from Greenspan's generally bullish testimony on Tuesday before the Senate Banking Committee. He said the U.S. economic recovery is broadening while inflation remains in check. While warning that the Fed is prepared to step up the pace of interest rate hikes if necessary, Greenspan repeated his view that recent price pressures are transitory and raised his estimate of gross domestic product growth for the second half of the year. On Wednesday, Greenspan returned to Capitol Hill for a second day of testimony, this time in front of the House of Representatives. With no changes in his prepared remarks, he essentially reiterated his remarks from the previous day to lawmakers. The biggest headline in the earnings blitz was a 49% jump in second-quarter profits reported by General Motors ( GM) that beat expectations. The automaker benefited from a pickup in its core automotive business as well as its credit arm. It earned $1.34 billion, or $2.36 a share, up from $901 million, or $1.58 a share, in the same quarter last year. Its stock closed down 25 cents, or 0.6%, to $43.35.
In other earnings news, Pfizer ( PFE) swung to a second-quarter profit of $2.86 billion, or 38 cents a share, reversing a charge-laden year-ago loss of $3.59 billion, or 48 cents a share. The drugmaker matched estimates before items. Its stock closed down 33 cents, or 1%, to $32. Eastman Kodak ( EK) said second-quarter earnings rose 38% from a year ago to $154 million, or 54 cents a share, on a 6% rise in sales. Its stock ended down $2.25, or 9.1%, to $27.05. J.P. Morgan lost $548 million, or 27 cents a share, in the second quarter, reflecting a $2.3 billion reserve to cover lawsuits over Enron and WorldCom. Before the charge, the bank earned $1.8 billion, or 85 cents a share, 2 cents better than estimates. Its stock closed up 42 cents, or 1.1%, to $36.82. After the close, eBay ( EBAY) posted a higher second-quarter profit helped by strong international growth, but the results fell short of expectations and its stock was recently down $5.17, or 6.7%, to $71.43 in after-hours trading. Other Internet giants, like Amazon ( AMZN) and Yahoo! ( YHOO), were down on the news. Overseas markets closed higher, with London's FTSE 100 gaining 0.9% to 4377 and Germany's Xetra DAX adding 1% to 3877. In Asia, Japan's Nikkei rose 1.6% to 11,434, while Hong Kong's Hang Seng rose 2.2% to 12,395. More earnings reports are scheduled to roll in Thursday morning, including Viacom ( VIA.B), SBC Communications ( SBC), AT&T ( T), Caterpillar ( CAT) and JetBlue ( JBLU). At 8:30 a.m. EDT, the government is expected to report that initial jobless claims dipped by 4,000 in the week ended July 16, to 345,000. Then at 10 a.m. EDT, the Conference Board is expected to say that its index of leading economic indicators stayed unchanged in June after rising 0.5% in May. Thursday's closing bell will precede another batch of earnings releases, including Coca-Cola ( KO) and Microsoft.