Wall Street ends lower amid data, earnings

/ Source: The Associated Press

Wall Street's main stock indices slid Wednesday, as a bright outlook from McDonald’s Corp. was offset by lower-than-expected retail sales and a disappointing forecast from Intel Corp.

A string of profit warnings from semiconductor companies have worried the equity markets for more than a week, and the picture only looked bleaker after chip bellwether Intel released its results late Tuesday. The market’s tone seemed to temporarily improve following McDonald’s midday announcement, but the advance was short-lived. Still, analysts remained optimistic.

“Despite all the worries, I think the earnings numbers will be spectacular,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. “Investors should not get discouraged because of the results of one company.”

At the close, the Dow Jones industrial average was off 38.79 points, or 0.4 percent, at 10,208.80, while the broader Standard & Poor’s 500-stock index was down 3.67 points, or 0.3 percent, at 1,111.47. The tech rich Nasdaq composite index shed 16.78 points, or 0.9 percent, to close at 1,914.88.

In addition to the negative sentiment surrounding earnings, a discouraging report on retail sales also held buyers back. Sales at America’s retailers fell 1.1 percent in June, the sharpest decline in 16 months, the Commerce Department said. Economists blamed bad weather, higher energy prices and slower payroll growth. The pullback followed a 1.4 percent rise in May.

Many market participants had hoped second-quarter results would help stocks break out of the tight trading range they’ve been mired in, but a steady march of earnings disappointments and profit warnings have dampened investor enthusiasm. Even so, the news has been mostly good so far.

But for investors already distracted by inflation, Iraq and the upcoming election, anything less than stellar seems like an upset. The weaker retail numbers for June, and anxiety over whether they portend a broader trend of slowing job growth and dwindling consumer confidence, added to the queasiness Wednesday. While earnings look good overall and market watchers are generally bullish about the economy, there may be little to drive stocks higher.

“All these different uncertainties ... they’re all keeping this market in a volatile trading range,” said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. “I think that’s pretty normal. And I think we may see that continue for a couple more months.”

Intel sank $2.76, or 11 percent, to $23.38, after the chip-maker said 2004 profit margins would be lower than expected as it works through a buildup of inventory. The outlook led several brokerage firms to downgrade the company, even though it matched earnings estimates and reported a surge in revenue on robust demand for cell phone memory chips.

McDonald’s gained $1.11 to $27.79 after the fast food chain said June sales growth at its restaurants around the world would help it beat Wall Street’s earnings estimates for the second quarter.

Juniper Networks Inc. added $2.59, or 12 percent, to $24.59, after the network-equipment maker said it expects third-quarter earnings and revenue to come in ahead of analysts’ estimates.

Genzyme Corp. gained $5.50, or 12 percent, to $50.00, after the pharmaceutical company beat earnings estimates and reported a 58 percent rise in second-quarter revenues and projected higher annual sales.

Bank of America Corp. lost 83 cents to $84.30 after blowing past earnings expectations, buoyed by results from recently acquired FleetBoston Financial Corp. But some analysts questioned the quality of its profits, noting that a significant portion was due to securities gains instead of the bank’s primary business.

Harrah’s Entertainment Inc. fell $1.00 to $50.98 on reports that it was close to an acquisition of rival Caesars Entertainment Inc. The deal would make Harrah’s the largest gambling company in the world. Caesars was up $2.08, or 15 percent, at $16.00.

Declining issues outnumbered advancers on the New York Stock Exchange. Volume was moderate. Overseas, Japan’s Nikkei stock average finished 2.2 percent lower Wednesday. In Europe, France’s CAC-40 lost 0.2 percent, Britain’s FTSE 100 added 0.3 percent and Germany’s DAX index closed down 0.1 percent.