Updated from 4:05 p.m. EDTTech stocks led another market retreat Wednesday after Apple's ( AAPL) fourth quarter disappointed investors and chip stalwart Intel ( INTC) got socked with a downgrade. The Dow Jones Industrial Average lost 36.26 points, or 0.35%, to 10,216.91. The S&P 500 fell 7.19 points, or 0.61%, to 1177.68. The Nasdaq Composite slid 23.62 points, or 1.15%, to 2037.47. The Dow ended at its lowest level since May 13. About 1.90 billion shares traded on the New York Stock Exchange. Trading volume on the Nasdaq was 2.04 billion shares. Decliners outpaced advancers 3 to 1. The 10-year Treasury was down 14/32 in price to yield 4.45%, while the dollar fell against the yen and euro. "Until the market becomes extremely oversold or shows some sign of life, the risks are still all on the downside," said Ken Tower, chief market strategist with CyberTrader. "Of course, if the market is to become extremely oversold, it will have to decline from here. There just isn't much out there for the bulls." Red numbers were widespread -- retailers, oil stocks, homebuilders, financials, transports, computer hardware makers and the chip sector all finished in negative territory. The drug sector was modestly higher. Despite a quadrupling of net income, Apple shares dropped 4.5% as the company's revenue line and iPod unit sales fell short of Wall Street forecasts. The computer company earned $430 million, or 50 cents a share, in the quarter. Excluding items, Apple earned 38 cents a share, beating the consensus by a penny. Sales rose 57% from a year ago to $3.69 billion, and iPod shipments totaled 6.45 million units, but analysts expected more on both fronts. Apple also announced a new video iPod as well as a new version of the company's iMac computer at a conference. Apple and Walt Disney ( DIS) reached an agreement to offer ABC and Disney television shows for download. The stock lost $2.34 to close at $49.25.
Prudential cut Intel to underweight from neutral and lowered its price target by $11 to $21 a share. The move was part of a larger call on semiconductors, a sector Prudential now views as unfavorable after a flurry of supplier warnings. Prudential said Intel could see revenue deceleration and suffer from heightened competition. That competition is coming from Advanced Micro ( AMD), which reported a 73% jump in earnings Tuesday to $76 million, or 18 cents a share. Revenue rose 23% to $1.52 billion. Analysts wanted 8 cents a share on sales of $1.38 billion. AMD estimated sequential microprocessor sales growth of 7% to 13% in the fourth quarter, a performance that would represent nearly 50% growth from a year earlier. Still, the stock, which sports a multiple of about 30 times next year's expected earnings, finished down $3, or 12.5%, to $21. Intel shed 18 cents, or 0.8%, to close at $23.24. The losses in both AMD and Intel sent the Philadelphia Semiconductor Sector Index down 0.4%. Paul Mendelsohn, chief investment strategist with Windham Financial, said that "technology stocks have been one of the bright spots of the market recently, as portfolio managers have been buying these issues, on expectations that falling oil prices might lift the sector. With weakness and rotation out of banking and financial stocks, a loss of technology leadership at this juncture could spell a lot of trouble for U.S. equities." Oil continued a nearly $2 rally on Tuesday. Concerns about the winter heating season and continued supply disruptions in the Gulf Coast sent November crude up 59 cents to close at $64.12 a barrel in Nymex floor trading. Gasoline futures were unchanged at $1.83 a gallon. The Energy Department's weekly supply report will be released Thursday, delayed one day because of the Columbus Day holiday.
Despite a 2.8% gain in crude Tuesday, oil stocks traded down. Chesapeake Energy ( CHK) fell by 4%, Sunoco ( SUN) lost 3.2%, Valero ( VLO) was down 3.3%, and Occidental Petroleum ( OXY) finished lower by 2.5%. Traders also contended with Tuesday afternoon's release of minutes from the Federal Reserve's Sept. 20 meeting, in which policymakers continued to express concern about inflation, particularly in the post-Katrina oil environment. "With growth of the economy expected to recover, meeting participants were concerned that price pressures, which had been elevated before the storm, could climb further, primarily as a result of additional increases in energy prices," the minutes read. Federal Reserve Chairman Alan Greenspan spoke Wednesday morning before the National Italian American Foundation in Washington, D.C. Greenspan remarked that economic flexibility has helped the economy "to absorb and recover from the shocks of stock market crashes, credit crunches, terrorism and hurricanes -- blows that would have almost certainly precipitated deep recessions in decades past. "Most recently, the flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for oil and natural gas that we have experienced over the past two years," said Greenspan. "The consequence has been a far more stable economy." Pfizer ( PFE) was the Dow's best gainer, finishing up 2.2% after the U.K.'s High Court of Justice upheld its exclusive patent covering the active ingredient in the company's cholesterol drug Lipitor until November 2011. However, the court ruled against Pfizer on another, lesser patent. Pfizer rose 54 cents to $24.84. Host Marriott ( HMT) reported third-quarter funds from operations of 19 cents a share Wednesday, beating the analyst consensus of 17 cents. The latest quarter included a 5-cent charge. Shares lost 50 cents, or 2.9%, to $16.59.
Shares of Harley-Davidson ( HDI) rose after the motorcycle company reported a better-than-expected 16% gain in third-quarter earnings and bumped up its estimate for 2006 earnings growth. The stock added 2.9%, up $1.30 to $46.90. Allegheny Technologies ( ATI) was trading higher after the company said it now expects third-quarter earnings 84 cents to 88 cents a share, including a tax benefit. The Thomson First Call consensus is for earnings of 76 cents a share. Allegheny climbed 43 cents, or 1.6%, to $27.45. RealNetworks ( RNWK), whose shares rose more than 30% on Tuesday on news of an antitrust payment from Microsoft ( MSFT), was upgraded to neutral from underperform Wednesday at CSFB. The stock, however, fell 37 cents, or 4.8% to $7.33. Deutsche Bank upgraded General Motors ( GM) to hold from sell, believing the market has priced much of the bad news into shares. That bad news includes the bankruptcy of former unit Delphi ( DPH), as well as weak demand, cost inflation and labor unrest. Shares of GM gained 28 cents, or 1.1%, to close at $26.70. Overseas markets were lower, with London's FTSE 100 losing 0.7% to 5342 and Germany's Xetra DAX down 1% to 4981. In Asia, Japan's Nikkei lost 0.7% overnight to 13,464, while Hong Kong's Hang Seng shed 2.2% to 14,575. To view Mike Marino's video take on today's market,
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