Updated from 4:12 p.m. EDTStocks finished sharply lower Wednesday as the semiconductor group led a broad selloff in technology shares and traders had a tepid reaction to the latest stream of corporate earnings. The Dow Jones Industrial Average dropped 121.59 points, or 1.09%, to 11,013.18, and the S&P 500 lost 13.92 points, or 1.09%, at 1258.60. The Nasdaq Composite was the hardest hit, falling 38.62 points, or 1.81%, to 2090.24. The 10-year Treasury bond fell 2/32 in price to yield 5.11%, and the dollar rose against the yen and euro. "The big question now is whether earnings are going to hold up or not," said Edgar Peters, chief investment officer with Pan Agora. "In tightening cycles, there is misplaced optimism when the economy is slowing that earnings wouldn't slow. Today showed the market repricing itself because of earnings disappointment. Volatility from geopolitical concerns and rising oil prices certainly didn't help." Since the start of July, the Nasdaq has dropped 80 points, or 3.7%. The Dow is off 138 points, or 1.2%, and the S&P 500 has given back 12 points, or 0.9%. Pressuring the Nasdaq was the Philadelphia Semiconductor Sector Index, which ended lower by 2.7% as all 19 of its components finished in the red. Chip shares have been notably influential this week, leading the market to a lower close Monday but then providing a late lift Tuesday. Intel ( INTC) was the main drag on the Dow, falling 4.2%. Fellow component IBM ( IBM) dropped 1.3% after JPMorgan Chase cut its revenue forecasts for the computer maker. Another Dow loser was Microsoft ( MSFT), down 2% to $22.64 after the European Union slapped the software maker with a $357 million fine. The EU determined that the company failed to make good on a pledge to share source code with other software makers as part of a 2004 antitrust settlement.
Microsoft will appeal the ruling, which also includes a threat of additional fines of almost $4 million a day starting next month. Elsewhere, the S&P Retail Index fell 2.5% amid concerns over consumer spending. Leading the index lower were Best Buy ( BBY), down 5.8%, and Circuit City ( CC), off 4.2%. About 1.48 billion shares changed hands on the New York Stock Exchange, with decliners outpacing advancers by an 11-to-5 margin. Volume on the Nasdaq was 1.80 billion shares, and three times as many stocks fell as rose. Oil rose after an Energy Department report that showed crude inventories fell by 6 million barrels last week, a much larger decline than expected. Gasoline inventories dropped by 400,000 barrels, and stores of distillates rose by 2.6 million barrels. In Nymex floor trading, August crude added 79 cents to finish at $74.95 a barrel and now sits 60 cents below its record high. Precious metals were mostly higher. Gold added $8.10 to close at $651.20 an ounce, silver was unchanged at $11.55 an ounce, and copper was higher by 3 cents $3.66 a pound. The data calendar was nearly bare, but in one report the Commerce Department said the U.S. trade deficit grew to $63.8 billion in May from $63.4 billion in April. Economists had been estimating that the deficit would widen to $65 billion for the month. Ian Shepherdson, chief economist with High Frequency Economics, said the trade number has the potential to "add 0.4% to second-quarter gross domestic product growth, raising the chance of a 3%-plus number." Shares of Infosys ( INFY) climbed 5% after the Indian outsourcer said second-quarter earnings rose a faster-than-expected 44% from last year. The performance helped prop up the Bombay market a day after train bombings killed 200 people and injured hundreds of others. In other earnings, M&T Bank ( MTB) said it earned $212.6 million, or $1.87 a share, in the second quarter, up 8% from last year. Results beat the Thomson First Call consensus of $1.82 a share. The stock fell 52 cents, or 0.4%, to close at $117.83.
Genzyme ( GENZ) posted second-quarter earnings of $134.5 million, or 49 cents a share, up from $123.6 million, or 46 cents a share, last year. Excluding one-time items, the company earned 68 cents a share, beating the average estimate by 2 cents. Shares of Genzyme surged $4.76, or 8.2%, to $62.74. After the bell Tuesday, biotech giant Genentech ( DNA) said second-quarter earnings rose 79% from last year to $531 million, or 49 cents a share, while adjusted earnings of 56 cents a share beat estimates by 9 cents. Genentech guided to full-year earnings of $1.98 to $2.05 a share, also ahead of forecasts. Shares dropped $3.08, or 3.7% to $80.98. Also late Tuesday, restaurant operator Ruby Tuesday ( RI) posted a fourth-quarter profit of $31.7 million, or 53 cents a share, up 22% from a year ago. Analysts polled by Thomson First Call were expecting earnings of $30.1 million, or 51 cents a share. Ruby Tuesday rose 19 cents, or 0.9%, to $23.19. Among ratings moves, Deutsche Securities began coverage of several oil and drilling stocks. The firm initiated Anadarko Petroleum ( APC), Noble Energy ( NBL) and Apache ( APA) with hold ratings. All three stocks finished in negative territory for the day. Deutsche assigned a buy rating to XTO Energy ( XTO) and Chesapeake Energy ( CHK), among others. On Thursday, earnings results are expected from PepsiCo ( PEP), Tribune ( TRB) and Marriott International ( MAR). Overseas stocks were mostly higher, with London's FTSE 100 closing up 0.1% to 5861 and Germany's Xetra DAX gaining 0.4% to 5638. In Asia, Japan's Nikkei fell 1.5% overnight to 15,249, and Hong Kong's Hang Seng added 0.2% to 16,522.