Techs weigh heavily on markets
Nervous investors overlooked strong earnings from Citigroup Inc. and a possible merger of two department store giants, pushing stocks substantially lower Thursday on disappointing earnings from the technology sector.
Investors were troubled as perennial market favorite eBay Inc. missed its earnings target for the fourth quarter and said its outlook for the current quarter was lower than expected, leading three brokerage firms to lower their ratings on the online auctioneer. Cell phone maker Qualcomm Inc. likewise issued a disappointing profit forecast.
The pressure from tech shares took momentum from Citigroup’s strong earnings, and investors also shrugged off reports of merger talks between Federated Department Stores Inc. and May Department Stores Co.
In the face of other uncertainties — the upcoming Iraqi elections, OPEC’s meeting on Jan. 30 and ongoing concern about inflation — the market will likely continue to give ground should earnings disappoint, analysts said.
“I think you’ve got all these things that have snowballed and are prompting people to pull chips off the table,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “We have a nice, modest, sustainable kind of economic environment that stocks perform pretty well in, but we have to get past some of these things first.”
The Dow Jones industrial average fell 68.50, or 0.65 percent, to 10,471.47.
Broader stock indicators also lost ground. The Standard & Poor’s 500 index was down 9.22, or 0.78 percent, at 1,175.41, and the Nasdaq composite index dropped 27.71, or 1.34 percent, to 2,045.88.
In economic news, the Conference Board’s Index of Leading Economic Indicators rose 0.2 percent in December, with November’s rise revised to 0.3 percent. The index is designed to measure future economic activity.
“When you see economic figures like this, it puts the past few weeks in its proper perspective,” said Rod Smyth, chief investment strategist at Wachovia Securities. “We’re in a correction right now from the rise we saw since mid-October. It’s perfectly natural for markets to behave this way.”
That correction has nearly wiped out all the Nasdaq’s gains from the fourth quarter rally, while severely denting the advances made by the Dow and S&P 500. The Nasdaq’s close was its worst showing since Nov. 10, while the Dow had its lowest close since Dec. 7 and the S&P saw its worst close since Nov. 30.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume was heavy.
The Russell 2000 index of smaller companies was down 5.57, or 0.9 percent, at 612.34.
Overseas, Japan’s Nikkei stock average fell 1.06 percent. In Europe, Britain’s FTSE 100 closed down 0.36 percent, France’s CAC-40 lost 0.69 percent for the session, and Germany’s DAX index dropped 0.59 percent.