(by Dr. Goldfinger)
Stocks tumbled on Wednesday, with technology shares leading the retreat, as fears about slowing growth in corporate profits overshadowed favorable news from Motorola and Microsoft.
The Dow Jones industrial fell 102.94 points, or 1.01%, to 10,046.13, its lowest close since May 24, the Standard & Poor’s 500 Index fell 14.79 points, or 1.33%, to 1,093.88, its lowest close since May 21, the Nasdaq Composite Index fell 42.70 points, or 2.23%, to 1,874.37, its lowest close since Oct. 24, 2003. It posted its biggest percentage loss since March 15.
Markets have absorbed broadly upbeat corporate results since the start of earnings season, but have seldom sent stocks substantially higher, taking a wait-and-see attitude that has frustrated bulls.
Even the Federal Reserve chairman’s upbeat assessment of the US economy lost its ability to cheer investors during his second day of testimony to Congress. He reassured markets that the US economy was on track and the weakness in June’s economic data was more likely a soft spot than the start of a slowdown.
Microsoft shares climbed 1.9% to $28.86 as investors applauded its plans to dispense much of its cash pile, including a special dividend payment of $3 per share, equivalent to $32bn, as well as doubling the regular dividend to 32 cents per share. However, Microsoft’s actions failed to lift other technology shares, as the company is increasingly seen as a blue-chip rather than a tech stock.
Merck shares slipped 0.5% to $44.59 in spite of the drugmaker’s profits matched analysts’ expectations on higher sales, and it reaffirmed full-year earnings estimates.
Elsewhere in pharmaceuticals, Pfizer fell 1% to $32 as investors shrugged off its return to profit on rising revenues.
Sun Microsystems dropped 7.8% to $3.79 in spite of swinging to a profit in the second quarter, largely owing to a gain from a legal settlement with Microsoft.
Texas Instruments also stumbled, down 5.2% to $20.63 after the chipmaker reported a nearly four-fold rise in its second-quarter profit thanks to record revenue in its wireless business.
Motorola shares slid 7.6% to $14.87 as it posted a net loss on accounting charges connected with its FreeScale Semiconductor spinoff. The losses outweighed rising revenues on brisk cell phone sales.