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Stocks fall profit fears Original Source Link: (May no longer be active)
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Stocks Fall for 2nd Week on Profit Fears
Fri Dec 13, 4:27 PM ET Add Business - Reuters to My Yahoo!
By Chelsea Emery
NEW YORK (Reuters) - Rising global tensions and a hazy corporate profit picture sent stocks lower on Friday, helping push the market to its second straight week of losses.
A bearish brokerage forecast for the chip industry also soured Wall Street's taste for technology stocks after a three-day run-up and helped turn attention away from a consumer confidence report that showed a brighter mood in December.
"There's just not a lot of conviction here," said Richard Cripps, chief market strategist at Legg Mason Wood Walker. "It's hard to get things started. The market is looking very heavy."
North Korea (news - web sites)'s decision to reactivate a nuclear power plant, worries about Iran's nuclear capabilities and a report that extremists linked to al Qaeda received a chemical weapon in Iraq intensified geopolitical concerns.
The Dow Jones industrial average closed down 104.55 points, or 1.22 percent, at 8,433.85, according to the latest figures. The broader Standard & Poor's 500 Index dropped 12.08 points, or 1.34 percent, to 889.50. The technology-laced Nasdaq Composite Index fell 36.97 points, or 2.64 percent, to 1,362.58.
Major market gauges fell for the second week following their rally off Oct. 9 lows. For the week, the Dow average was down 2.4 percent, the S&P 500 fell 2.5 percent and the Nasdaq composite sagged 4.2 percent.
Trading was light, with just 1.26 billion shares changing hands on the New York Stock Exchange (news - web sites), and more than 1.38 billion traded on Nasdaq.
"It's a wait-and-see attitude with how fourth-quarter earnings are going to come in," said Arnie Owen, managing director of equities at Roth Capital Partners. "It's more a lack of buying going on than selling."
Market breadth was negative, with two stocks falling for every one that rose on the Big Board, and 23 stocks down for every 10 that rose on Nasdaq.
ECONOMIC WORRIES
Stocks briefly cut losses after the University of Michigan's preliminary report on consumer sentiment showed U.S. sentiment rose in December for the second straight month. But an earlier report from the government showed inflation at the wholesale level was more subdued than expected. The Producer Price Index (news - web sites) stirred fears that companies won't be able to raise prices, which could hurt profits.
"Larger-than-expected producer price data has rekindled deflation talk," said Todd Clark, head of listed trading at Wells Fargo Securities. "Consumer confidence was better and usually that's more important, but as we head into a weekend of geopolitical uncertainty, people aren't finding reasons to buy stocks."
Flaring political tensions, surging oil prices and a drop in the dollar's value drove safe-haven gold prices to a three-year high. Crude oil prices climbed, reflecting the expected impact of the strike in Venezuela and leading OPEC (news - web sites) producer Saudi Arabia's quick move to implement production cuts the cartel agreed to on Thursday.
While the news appeared glum on Friday, hopes abounded that contributions by corporations to pension plans, yearly bonuses and some year-end buying will help underpin stocks over the next few weeks, traders said.
"We've gotten some bad numbers like the negative research downgrades of chipmakers, but there's an overall sense of optimism," said Patrick Duffy, a senior trader for Friedman, Billings, Ramsey.
CHIPS TAKE A HIT
Shares of three top semiconductor makers dropped after J.P. Morgan gave them tepid ratings due to concerns about slowing growth of personal computer sales and overcapacity.
Analyst Christopher Danely started coverage of Intel Corp. and Advanced Micro Devices Inc. with "underweight" ratings. And he started Texas Instruments Inc., which makes chips for mobile phones, at "neutral."
Intel fell 59 cents to $17.60 and ranked as the second-most active Nasdaq stock. AMD was down 43 cents at $7.32 and Texas Instruments Inc. slid 74 cents to $16.70.
The Philadelphia Stock Exchange's semiconductor index slumped 3.7 percent. The index had a bullish run in October and November, climbing about 70 percent. But it has been hit by a number of investment bank downgrades on chip stocks, and some cautious forecasts from companies like Nokia (news - web sites), the world's largest maker of mobile phones.
Video game publishers' shares fell after Goldman Sachs downgraded the sector, citing fears that a slowdown in industry growth has come sooner than expected. Electronic Arts Inc. fell $4.65, or 7.6 percent, to $56.70, while Activision Inc. dropped $1.37, or 8.2 percent, to $15.45.
Bristol-Myers Squibb topped the NYSE's most-active list, down 29 cents at $25.06, the day after a story in The Wall Street Journal put the spotlight on some of the drug maker's accounting practices.
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