Thursday, January 18, 2007

From combined dispatches

Stocks fell for the second consecutive day yesterday, buffeted by declining oil prices that sent energy shares reeling, strong economic data that further diminished hopes for an interest rate cut, and technology sales forecasts below estimates. The tech-heavy Nasdaq Composite Index fell the most in seven weeks.

Apple Inc., maker of IPod music players and Macintosh computers, tumbled the most in almost a year after saying sales will trail projections. Applied Materials Inc., the biggest manufacturer of equipment for semiconductor factories, dropped on concern that demand for chips will slow.

Computer-related companies, whose earnings are forecast to grow faster than any other industry this year, declined for a third day after Apple joined Intel and Motorola in missing estimates this month. Technology shares had been the best performers in 2007 prior to Wednesday.

“There’s no appetite for misses out there,” said Peter Goldman of Chicago Asset Management. “If you come up light, you’re getting your head kicked in.”

The Nasdaq fell 36.21, or 1.5 percent, to 2,443.21. It was the index’s largest slide since Nov. 27. The Standard & Poor’s 500 Index lost 4.25, or 0.3 percent, to 1,426.37.

The Dow Jones Industrial Average declined 9.22, or 0.1 percent, to 12,567.93. The Russell 2000 Index of smaller companies dropped 1.3 percent to 778.21.

The U.S. economy is rebounding from last year’s slowdown without stoking inflation, government reports on housing, consumer prices and jobs suggested yesterday.

Home starts unexpectedly climbed 4.5 percent last month from November, the Commerce Department said. Consumer prices excluding food and energy rose 0.2 percent, the Labor Department reported, matching forecasts by economists. Separate figures showed jobless claims fell to an 11-month low of 290,000 and the Federal Reserve Bank of Philadelphia said manufacturing in the region resumed its expansion.

The overall Consumer Price Index, with food and energy included, rose 0.5 percent in December, the first increase in four months. But the price gauge climbed just 2.5 percent last year, the best showing since 2003 and nearly a full percentage point lower than the 3.4 percent jump in 2005.

The encouraging news stemmed from a sizable slowdown in energy costs in the second half of last year, after 21/2 years when the price of gasoline and other fuels had surged to new highs. Also helping was a significant moderation in health care costs. They rose by 3.6 percent, the smallest annual gain since 1998.

In further good news, inflation-adjusted wages rose at the fastest clip in nearly a decade.

The reports suggest the Federal Reserve, which last year predicted a pickup in growth just as some economists warned of a recession, will neither increase nor reduce interest rates in coming months. Yields on the Treasury 10-year note ended the day lower after touching three-month highs following the numbers.

Technology shares made up nine of the 10 worst performers in the S&P 500. Apple, which closed at a record high two days ago, slumped $6 to $89.08. Its 6.3 percent drop was the steepest since last February.

Second-quarter sales, which typically fall after the holidays, will be as much as $4.9 billion, Apple said, shy of the $5.23 billion average estimate. Apple forecasts profit of as much as 56 cents a share, compared with estimates for 60 cents.

Applied Materials retreated $1.15 to $18.25, bringing its five-day slide to 6.6 percent.

Lam Research Corp., a maker of equipment for chip factories, dragged semiconductor shares lower. The company said earnings this quarter will be $1.03 to $1.07 a share, lower than the $1.11 average estimate. Its shares plunged $7.91 to $46.22.

Intel, which this week said competition is hurting profits, fell for a second day. It dropped 39 cents, or 1.9 percent, to $20.65 for the Dow’s biggest loss. Novellus Systems Inc. slid $2.19 to $30.19. KLA-Tencor Corp. declined $3.44 to $47.81.

A measure of computer-related stocks tumbled 1.8 percent for the steepest drop among 10 S&P 500 industries.

The shares had led gains in stocks this year, climbing 3.9 percent through Jan. 16.

A gauge of energy stocks in the S&P 500 had the second-steepest retreat after oil fell to near $50 a barrel on a report that showed U.S. oil and fuel stockpiles surged. Exxon Mobil Corp. lost 50 cents to $71.96.

Crude for February delivery slid 3.4 percent to close at $50.48 in New York. Futures briefly dipped below $50 for the first time since May 2005.

U.S. Treasury bonds rose after investors were lured by 10-year note yields that touched the highest since October, while the dollar approached a four-year high against the yen. Gold prices fell.

The unexpected pickup in housing starts lifted Pulte Homes Inc. and other home builders. Retailers J.C. Penney Co. and Target Corp. climbed as jobless claims slid to an 11-month low.

More than two stocks fell for every one that gained on the New York Stock Exchange. About 1.62 billion shares changed hands on the Big Board, 5.5 percent more than the three-month daily average.

An S&P gauge of home builders advanced for a second day. Pulte Homes rose 9 cents to $32.90. Lennar Corp., the fourth-largest U.S. home builder, which Wednesday said profit may rise this year, added 10 cents to $52.05.

Retailers advanced on expectations lower fuel costs will encourage spending. J.C. Penney rose $3.97 to $83.58 after JPMorgan upgraded it to “overweight” from “neutral.” Target added $1.15 to $61.51.

Cablevision Systems Corp. gained $1.52 to $30.77. Shareholder Mario Gabelli said he would be in favor of an increased offer by the founding Dolan family or a merger with Time Warner Cable. The company’s panel of directors Wednesday turned down the Dolan family’s sweetened $30-a-share offer, worth $8.9 billion.

SLM Corp. plunged $2.53 to $45.47. Sallie Mae, as the nation’s largest provider of college student loans is known, said fourth-quarter profit fell 96 percent because of losses on derivatives. So-called core earnings grew less than analysts forecast.

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