NEW YORK, (Reuters):
STOCKS SLID yesterday, led by a steep sell-off in the semiconductor sector, after a disappointing forecast from tech bellwether Intel Corp. fanned investors' worries about the outlook for corporate profits.
Intel, the world's biggest chipmaker, on Tuesday cut its profit margin forecasts and said inventories rose, even though it reported a near doubling of profit. The news spurred a sell-off that dragged the Nasdaq Composite to its lowest close since May 21.
"The tech market is just getting hit really hard. It's obviously all Intel," said David Memmott, head of listed block trading at Morgan Stanley. "We're in the beginning of this quarter's earnings, and so far, they haven't been very good."
Unexpectedly weak retail sales data did little to soothe Wall Street's worries that economic growth may be slowing.
OIL PRICES
Investors also kept a wary eye on oil prices, which surged in a flurry of buying after the price pierced the technically key US$40 mark. NYMEX crude for August delivery jumped US$1.53 to settle at US$40.97 a barrel after hitting a session high of US$41.05.
The technology-laced Nasdaq Composite Index dropped 16.78 points, or 0.87 per cent, to 1,914.88.
The Dow Jones industrial average fell 38.79 points, or 0.38 per cent, to 10,208.80, while the Standard & Poor's 500 Index slipped 3.67 points, or 0.33 per cent, to 1,111.47, based on the latest available data.
Trading was active, with about 1.5 billion shares traded on the New York Stock Exchange and 2.1 billion shares traded on Nasdaq.
Before the regular trading session opened, the government reported June retail sales fell 1.1 percent overall and dropped 0.2 percent excluding automobiles. Wall Street analysts had been expecting sales to fall 0.6 percent overall and to rise 0.2 percent excluding autos.
The market made a brief run at positive territory as the lure of battered shares drew investors, but by late afternoon, the rally had fizzled.
Intel fell US$2.76, or 10.6 percent, to US$23.38, driving a sell-off in its peers.
Shares of Applied Materials Inc., the world's largest microchip production equipment maker, fell 6.2 percent, or US$1.11, to US$16.82.
Other stocks related to semiconductor manufacturing also tumbled - shares of Novellus Systems Inc. sank 5.9 percent or US$1.71 to US$27.53 and Micron Technology Inc. shares fell 4.9 percent or 69 cents to US$13.41.
The Philadelphia Stock Exchange's semiconductor indextumbled 4.5 percent, dipping to its lowest close since September 2003. One bright spot was McDonald's Corp., which climbed almost 5 percent to a session high of US$27.99 and helped underpin the blue-chip Dow after it said its quarterly profit will beat expectations.
McDonald's Corp. said it will post a 27 percent increase in second-quarter earnings per share as it delivers its best second-quarter sales growth since 1987.
At the close, McDonald's stock was up US$1.11, or 4.2 percent, at $27.79.
Network equipment maker Juniper Networks Inc. gained after its quarterly profit, excluding one-time items, beat Wall Street expectations as demand in the telecommunications segment strengthened. The stock rose $2.59, or 11.8 percent, to $24.59.
Yum Brands Inc., parent of the KFC, Pizza Hut and Taco Bell fast-food chains, gained after it reported higher quarterly earnings and raised its full-year profit outlook. It jumped $1.04, or 2.8 percent, to US$37.95.
