Stocks extended their losses into a second day Thursday after a cautious outlook from home builder Toll Brothers Inc. and a surge in energy prices rattled investors.
The market was pleased with revised forecasts from chipmakers Texas Instruments Inc. and Xilinx Inc., signals that tech spending remains healthy. But anxious traders brushed aside the news and waited for Intel Corp.’s mid-quarter update after the closing bell.
Without much news to guide trading, Wall Street drifted this week following a November rally that vaulted stocks to four-year highs. Recent signs that the economy is faring better than expected renewed fears about inflation and rising interest rates, although some traders still anticipate a rally in stocks by year-end.
“The dynamics of [this week’s] decline have been orderly and nothing to be concerned with,” said Steven Goldman, chief market strategist at Weeden & Co. “The market ... cleansed some of its excesses on that pullback.”
Goldman said the main concern on Wall Street continues to be whether the Federal Reserve will extend its string of rate hikes now that the economy appears to be doing well. Higher rates could lead to a consumer slowdown as lending costs increase, he said.
At the close of trading, the Dow Jones industrial average was down 55.79 points, or 0.5 percent, while the broader Standard & Poor’s 500-stock index was off 1.53 points, or 0.1 percent. The Nasdaq composite index declined 5.55 points, or 0.3 percent.
The sole economic report of the day came from the Labor Department, which said unemployment claims grew by 6,000 to 327,000 last week, although 8,000 of those were hurricane related. Economists were expecting claims to drop to 318,000.
Colder weather in the Northeast and Midwest drove expectations for greater heating fuel demand, although weekly inventory reports have indicated that U.S. oil and gas reserves continue to expand. On the New York Mercantile Exchange, natural gas surged $1.29 to $14.99 per 1,000 cubic feet, as a barrel of light crude jumped $1.45 to $60.66.
Bond prices reversed Wednesday’s decline, with the yield on the 10-year Treasury note tumbling to 4.46 percent from 4.52 percent late Wednesday. The dollar was mixed against other major currencies in European trading, while gold prices lingered near record highs.
General Motors Corp. paced the Dow’s decline, falling $1.04 to $22. The troubled automaker, which plans to cut 30,000 jobs and shut 12 plants by 2008, on Wednesday said it is in talks to appoint billionaire Kirk Kerkorian as a company director, a move analysts say could lead to drastic restructuring actions.
Tech stocks turned lower despite two chipmakers’ upbeat reports. On Wednesday, Texas Instruments lifted the low end of its quarterly earnings estimate and forecast sales near the top of a previous range, while Xilinx boosted its sales target. Texas Instruments fell 93 cents to $32.63, Xilinx dropped 46 cents to $26.02 and Intel slid 45 cents to $25.70.
Intel said it expected capital spending to be lower than the midpoint it had set in previous guidance. It also tightened the range it expects fourth-quarter revenue to hit. In after-hours trading, its stock fell to $25.02, down 68 cents.
Toll Brothers posted a 72 percent jump in fourth-quarter profit as revenue climbed 40 percent. But investors remained optimistic about the stock itself although the homebuilder gave a disappointing forecast for next year and said it was unsure about 2007 earnings. Toll Brothers gained $1.25 to $35.55.
Costco Wholesale Corp. said a modest rise in sales helped lift its quarterly profit 12 percent to match Wall Street forecasts. Sales at its warehouse clubs open at least a year grew 9 percent. Costco sank $1.06 to $48.29.
Fast-food chain McDonald’s Corp. said its worldwide same-store sales grew 4 percent in November, with sales up 4.8 percent at U.S. locations. Its results, however, came in below analysts’ estimates, sending McDonald’s fell 44 cents to $34.82.
Overseas, Japan’s Nikkei average declined 1.95 percent. In Europe, Britain’s FTSE 100 rose 0.04 percent, Germany’s DAX index gained 0.38 percent and France’s CAC-40 was higher by 0.20 percent.