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Wall Street trades mixed after Intel report

POSTED: January 31, 2008 5:02 a.m.

NEW YORK (AP) - Stocks turned mixed Wednesday after Intel Corp. announced disappointing earnings and JPMorgan Chase & Co. offered some relief for investors concerned about the health of banks.

The JPMorgan report as well as results from Wells Fargo & Co. appeared to remind Wall Street that while the fallout of souring loans was widespread, it wasn't necessarily evenly felt. And buyout news in the tech sector gave a boost to investor sentiment.

The markets fluctuated and remained edgy, particularly after a drop Tuesday that took the Dow Jones industrials down nearly 280 points. Investor patience has been tested by the predictions of some economists that a recession is at hand and by unsteadiness in the financial sector, where many banks are struggling to shore up damaged balance sheets.

Intel's failure to meet earnings and revenue forecasts for the fourth quarter, along with first-quarter projections that came in at the low end of analysts' forecasts, weighed on stocks. Earlier this week there was market speculation that the technology sector, which sometimes benefits from a weak dollar and overseas strength, might be able to withstand the weakness sweeping other parts of the U.S. economy.

The tech arena did see some cheer Wednesday, thanks to Oracle Corp.'s deal to buy BEA Systems Inc. for about $7.85 billion. Last year BEA rejected a less expensive bid from Oracle, which raised its offer but not to the level sought by BEA.

But despite some upbeat corporate news, investors remained focused on where the economy might be headed.

"On Wall Street, the talk clearly is about recession," said Subodh Kumar, global investment strategist at Subodh Kumar & Assoc. in Toronto. "Expectations about earnings are being reduced, and analysts have been chasing the earnings down as opposed to be being proactive and having done so earlier."

In early afternoon trading, the Dow rose 26.50, or 0.21 percent, to 12,527.61.

Broader stock indicators fell. The Standard & Poor's 500 index slipped 1.12, or 0.08 percent, to 1,379.83, and the Nasdaq composite index fell 14.73, or 0.61 percent, to 2,402.86.

Intel was by far the biggest decliner among the 30 stocks that make up the Dow and also weighed on the tech-dominated Nasdaq. Intel fell $2.65, or 11.72 percent, to $20.03.

Advancing issues and decliners were nearly even on the New York Stock Exchange, where volume came to 935.5 million shares.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.69 percent from 3.68 percent late Tuesday. The dollar fell against most other major currencies — hitting a 2½-year low against the yen — but rising against the euro. Gold prices, which have hit record levels in recent sessions, eased.

Light, sweet crude fell $1.84 to $90.06 per barrel on the New York Mercantile Exchange after the government reported that domestic oil supplies rose unexpectedly last week. Prices have fallen in recent days as investors girded for an economic slowdown that could dampen demand.

Kumar contends markets will remain jumpy as Wall Street sorts out its concerns about the economy as well as the troubles with bad debt.

"Volatility will probably remain high into midyear because analyst expectations are coming down quite rapidly and we're in the eye of the storm as far as credit write-downs go for banks," he said.

Economic news also added to Wall Street's concerns. The Labor Department said inflation jumped by the highest amount in 17 years in 2007 amid a spike in energy and food costs. Excluding those areas, so-called core inflation remained relatively stable.

Consumer prices in December rose 0.3 percent, while core inflation showed a 0.2 percent advance. Analysts had expected both figures to rise 0.2 percent, according to Thomson/IFR.

The Federal Reserve, in setting monetary policy, is known to pay closer attention to the core rate. In any case, investors appear more worried about the prospect of slower growth than that of higher inflation.

In addition, Fed Chairman Ben Bernanke already has sent strong signals that another rate cut is on the way. The Fed's next monetary policy meeting is Jan. 29-30, though some investors have debated whether the central bank would step in and cut rates before then.

The Fed said Wednesday that output at the nation's factories, mines and utilities was flat in December. Wall Street had expected industrial production to show a 0.2 percent decline. The reading wasn't necessarily downbeat. Had output risen, it could have reassured some investors about the state of the economy but also perhaps stirred concerns about inflation.

JPMorgan offered a first-quarter earnings report that revealed relatively light exposure to the faltering subprime loans as it booked a write-down of $1.3 billion, which was smaller than the massive losses of peers like Citigroup Inc. Citi on Tuesday said it swung to a loss of nearly $10 billion in the fourth quarter after booking a write-down of $18.1 billion for bad bets tied to the mortgage industry.

Despite its relatively strong results, JPMorgan warned of difficult conditions this year and said problems with home equity loans dented profits and underscored mounting pressures in consumer lending. JPMorgan rose $3.19, or 8.3 percent, to $42.41, while Citi, which is also a component of the Dow, slipped 48 cents, or 1.8 percent, to $26.48 after losing 7.6 percent Tuesday.

Wells Fargo revealed its first decline in profits in more than six years and also cited rising losses on home equity loans. But the company, one of the nation's largest banks, largely sidestepped the write-downs that many other banks have been forced to make. Wells Fargo rose 96 cents, or 3.6 percent, to $27.45.

BEA Systems Inc. jumped $2.97, or 19 percent, to $18.55 after word of its deal. Oracle rose 34 cents to $21.65.

The Russell 2000 index of smaller companies rose 5.75 percent, or 0.82 percent, to 703.18.

In overseas trade, Japan's Nikkei gave up 3.35 percent. London's FTSE 100 closed down 1.37 percent, Frankfurt's DAX fell 1.25 percent and Paris' CAC fell 0.48 percent.

 

Copyright 2008 The Associated Press
 

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