Jitters on Wall Street ahead of earnings season
US stocks fell yesterday, led by losses in technology after brokerage downgrades of Intel and other major companies as worries increased about third-quarter US earnings.
Shares of Intel, the world’s largest semiconductor maker, lost 2.7 per cent after negative reports by at least two brokerages. Robert W Baird & Co cut its price target on the stock to $26 from $32, citing weak demand for notebooks.
The news triggered selling of large-cap technology shares, including Oracle and Apple. Microsoft shares lost 1.7 per cent and ranked as the biggest drag on both the Nasdaq and the S&P 500.
“It’s a good bet that companies aren’t significantly expanding their tech projects at this point,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group.
Nine of the S&P 500’s 10 sectors fell, with energy the one gainer for the day as crude oil prices jumped on concerns of a supply disruption in the Middle East.
Earnings warnings have left investors cautious after a rally that has driven the S&P 500 up nearly 16 per cent so far in 2012, lifting it to an almost five-year high.
Among other large multinationals that have warned about earnings, citing weak demand in Europe and China, are FedEx, Caterpillar and Hewlett-Packard
“Stocks had a big move for the year. Now people are waiting for more clarity on third-quarter results and fourth-quarter guidance,” said Michael James, senior trader at Wedbush Morgan in Los Angeles.
Analysts expect quarterly earnings for S&P 500 companies to decline about 2.3 per cent from the year-ago period, according to Thomson Reuters data.
At the close, the S&P 500 was 7.9 per cent below its all-time closing high of 1,565.15, reached five years ago on this date.
The Dow Jones industrial average fell 110.12 points, or 0.81 per cent, to 13,473.53 at the close. The S&P 500 lost 14.40 points, or 0.99 per cent, to 1,441.48. The Nasdaq Composite dropped 47.33 points, or 1.52 per cent, to close at 3,065.02.
Dow component Alcoa reported quarterly results after the bell and its stock rose to $9.20, adding to the slight gain during regular hours. Alcoa closed at $9.13, up 0.1 per cent.
Shares of Netflix slid 10.9 per cent, reversing Monday’s sharp gains after Bank of America Merrill Lynch cut the video streaming company’s stock to “underperform” from “buy”.
About 5.8bn shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.53bn shares.
More than three issues fell for every one that rose in the NYSE. On the Nasdaq, about seven stocks fell for every two that rose.