NEW YORK, Jan. 15 (UPI) — Stock prices on the New York Stock Exchange and the Nasdaq Stock Market ended sharply lower Wednesday, pressured by news Intel Corp. plans to cut capital expenses and by a fresh report on wholesale inflation.
The blue-chip Dow Jones industrial average, which rose 56.64 points Tuesday, fell 119.44, or 1.35 percent, to close at 8,723.18. The tech-heavy Nasdaq composite index, which gained 14.95 points in the previous session, dropped 22.19 points, or 1.52 percent, to close at 1,438.80.
The broader New York Stock Exchange composite index fell 62.21 to close at 5,171.45 while the Standard & Poor’s 500 index dropped 13.44 points to close at 918.22. The American Stock Exchange composite index was flat, losing 0.50 points to close at 831.30 while the Wilshire 5000 Index dropped 113.19 points to close at 8,679.98.
Volume was 1.66 billion on the Big Board and 1.63 billion on the Nasdaq Stock Market.
Analysts said stocks fell from the opening bell after technology heavyweight Intel Corp. said it would slash its budget for semiconductor equipment and a key inflation gauge triggered questions over pricing power.
Larry Wachtel, senior vice president at Prudential Securities, said, “Intel giveth, and Intel taketh away. The big semiconductor company beat analyst estimates after the close yesterday, but cut capital spending plans sharply.”
After the market closed on Tuesday, the Intel company posted quarterly earnings that more than doubled, but the world’s largest maker of computer chips said it plans to cut capital expenses for 2003 by as much as 25 percent. Intel serves as a barometer for the battered chip industry and is one of the largest companies to report earnings so far.
Analysts at Credit Suisse First Boston cut their earnings outlook for Intel slightly, due to a technical factor related to acquisition charges. Merrill Lynch kept its 2003 expectations intact, but lowered its earnings estimate for 2004. Both firms believe that, given their growth expectations, Intel’s stock is on the pricey side.
In a research note to clients, Merrill Lynch analyst Oscar Nestell said, “Intel’s outlook was quite conservative, both for the first quarter of 2003 and for the whole year. We think that Intel may be sandbagging a little, but also believe that management has yet to see a real recovery in demand.”
A government report added pressure to the market by showing producer prices were flat in December as falling car and truck prices helped offset rising food and energy costs.
The Labor Department said the Producer Price Index, a key measure of inflation at the wholesale level, was unchanged in December after falling 0.4 percent in November and jumping 1.1 percent in October. Economists on Wall Street were expecting the PPI to rise 0.3 percent during the final month of 2002.
Excluding the often volatile food and energy sectors, the so-called core PPI fell 0.3 percent after falling 0.3 percent during the previous month and rising 0.5 percent in October. Economists on Wall Street were expecting the core rate to rise 0.1 percent.
The report showed prices for energy, gasoline and food rose while prices for autos and capital equipment declined.
For all of 2002, wholesale prices rose 1.2 percent after declining 1.6 percent decline in 2001. Core prices declined 0.4 percent in 2002 after rising 0.9 percent during 2001.
Economists said the Producer Price Index report highlighted the difficulties manufacturers have been having in trying to raise prices.
The Commerce Department said U.S. business inventories climbed for a seventh consecutive month in November, supported by stock-building in the automobile industry as dealers replenished stocks from strong auto sales over the summer.
U.S. business inventories rose 0.2 percent in November to a seasonally adjusted level of $1.136 trillion following a 0.1-percent gain in October. Economists on Wall Street were expecting inventories to rise 0.1 percent during the month.
Meanwhile, analysts said the market also was pressured after DuPont, the nation’s largest chemical company and a Dow component, warned of disappointing fourth-quarter earnings as it struggles with higher energy costs and weak demand.
And, Automatic Data Processing lowered its fiscal 2003 outlook to low-single-digit revenue and earnings growth from mid-single-digit growth.
The quarterly earnings reporting season kicks into higher gear this week, and investors are hoping for signs of solid growth. Computer maker Apple Computer Inc. and Internet media company Yahoo! Inc. are slated to post their earnings after the closing bell.
Wachtel noted technology fans will be focused on Yahoo!.
Meanwhile, U.S. Treasury prices inched higher. The 10-year bond rose 2/32 to 99 14/32. Its yield, which moves in the opposite direction of its price, slipped to 4.07 percent from 4.08 percent late Tuesday.
In Europe, stock prices ended lower in moderate trading in London, Frankfurt and Paris. The London International Stock Exchange’s blue-chip FTSE-100 index lost 54.7 points, or 1.4 percent, to 3,890.9. The German DAX index fell 43.21 points, or 1.4 percent, to 3,055.51 and the French CAC-40 index lost 39.37 points, or 1.2 percent, to 3,134.66.
Analysts said British stocks fell late in the session, pressured by the early performance on Wall Street and weakness in the retail, media and banking sectors.
German and French stocks were pressured as Intel’s sharper-than-expected cut in capital expenditure in 2003 hit techs, suggesting the chip making giant does not hold out much hope for an improvement in IT demand soon.
Meanwhile, rising oil prices pressured auto stocks, dealers said.
In Asia, prices ended higher in active trading on the Tokyo Stock Exchange, lifted by news that a Japanese bank will raise capital in a sign of accelerated efforts to clean up bad loans. The blue-chip Nikkei Stock Average, which gained 82.61 points Tuesday, rose 58.69 points, or 0.7 percent, to 8,611.75.
Analysts said stocks got a boost near the end of the session as investors welcomed news that Sumitomo Mitsui Banking plans to raise fresh capital by issuing shares to Goldman Sachs.
Prior to the bank sector news, the benchmark Nikkei index had been straddling the previous day’s closing level, as investors showing mixed reactions to Intel’s earnings report late Tuesday and the dollar’s continued weakness on global currency markets.
Elsewhere in Asia, prices ended higher in moderate trading on the Hong Kong Stock Exchange. The blue-chip Hang Seng Index, which lost 37.77 points during the previous session, rose 77.18 points, or 0.8 percent, to 9,873.49, boosted by Wall Street’s gains on Tuesday and buying of export and banking shares.
Prices ended slightly lower on the South Korean Stock Exchange. The Korea Composite Stock Price Index, or Kospi, which rose 1.99 points during the previous session, eased 1.76 points, or 0.3 percent, to 648.29, pressured late in the session by futures-led program selling.
Prices ended higher on the Taiwan Stock Exchange. The key Weighted Index, which added 1.16 points during the previous session, gained 25.28 points, or 0.5 percent, to 5,017.70, lifted by strength in chipmakers.
Meanwhile, Singapore stocks ended lower, snapping their five-day winning streak as gains in technology shares failed to offset weakness in banking stocks. The key Straits Times Index, which rose 15.32 points during the previous session, lost 14.75 points, or 1.1 percent, to 1,386.62.
Elsewhere, prices ended fractionally higher in lackluster trading on the Australian Stock Exchange. The blue-chip All Ordinaries Index, which added 6.50 points during the previous session, added 0.60 point to 3,049.60.