Stocks tumbled on Thursday as worries about chip maker Intel Corp.’s upcoming revenue forecast, surprisingly soft June sales from General Motors and a number of brokerage downgrades prompted investors to lock in recent gains.
On a Morgan Stanley internal call this morning, analyst Mark Edelstone said he believed that the midpoint of Intel’s third-quarter revenue outlook, which will be announced when the technology bellwether reports earnings on July 13, could be below analysts’ estimates, according to people familiar with what was said on the call. Edelstone’s office declined to comment.
GM stock took a hit after the world’s biggest automaker said its U.S. sales fell an unexpectedly sharp 15.6 percent in June as its aggressive incentives and discounts failed to lure more buyers into showrooms. Ford Motor Co., the second-largest U.S. automaker, said its June U.S. sales fell 8 percent, sending its stock down 4 percent and dragging on the S&P 500.
Internet portal Yahoo Inc. and airplane maker Boeing Co. weighed on market sentiment after analysts cut their investment ratings.
The Dow Jones industrial average dropped 101.32 points, or 0.97 percent, to 10,334.16. The Standard & Poor’s 500 Index fell 11.90 points, or 1.04 percent, to 1,128.94, based on the latest available data. The technology-laced Nasdaq Composite Index slid 32.24 points, or 1.57 percent, to 2,015.55.
Trading was brisk, with 1.5 billion shares changing hands on the New York Stock Exchange and 1.7 billion shares traded on Nasdaq.
Cardinal Health Inc. dragged on the market, tumbling nearly 25 percent after the drug wholesaler slashed its earnings forecast and its chief executive admitted a credibility problem with Wall Street. Its shares, the most active on the NYSE, dropped $17.19 to $52.86. Cardinal, the NYSE’s biggest percentage loser, fell as low as $52.40.
After the close, electronic bond broker ESpeed Inc. and database software maker Sybase Inc. both fell after warning their results would fall short of analysts’ estimates. ESpeed’s stock fell to $15.48 on the INET electronic brokerage system from $17.46, its Nasdaq close. Sybase shares sank to $16.38 on INET from $17.67, its NYSE close.
Investors are also bracing for Friday’s key nonfarm payrolls data for June, worried about the potential for a lackluster report after a government report showed the number of Americans seeking first-time unemployment benefits rose unexpectedly last week, traders said.
"You have investors perhaps a bit more fearful of what they might see in employment data tomorrow, with a slight uptick in the initial claims data and with some softening in the Chicago PMI two days ago," said Jack Caffrey, equity strategist at JP Morgan Private Bank.
A spike in oil prices added to investors’ jitters amid fears it will cut into corporate profits. NYMEX crude oil futures gained more than a dollar on a strong rally in heating oil futures. NYMEX August crude futures jumped $1.69, or 4.6 percent, to $38.74 a barrel.
(Reuters)