NEW YORK (CNN/Money) -
Stocks closed out a brutal month in mixed trade Wednesday, with blue chips shrugging off a pair of worse-than-expected economic reports by the close, while the Nasdaq lost more ground on profit warnings in the chip and retail sectors.
July was the worst month ever for the Dow Jones industrial average and the first time it has fallen four months in a row in 20 years. It was the worst month since World War II for the Standard & Poor's 500 index.
The Nasdaq composite lost 15.93, or 1.19 percent, to close at 1,328.26 Wednesday. For the month of July, it lost more than 135 points, or 9.0 percent.
The Dow Jones industrial average added 56.56, or 0.65 percent, to close at 8,736.59; it was down more than 141 points earlier in the session. For the month, it lost 507 points, or 5.4 percent.
The Standard & Poor's 500 index added 8.84, or 0.98 percent, to end the day at 911.62. But for the month, it is down 78 points, or just under 8 percent.
"It's been an horrendous month, but it's nice to end it the way we have in this last week and today [Wednesday] is an indication of that," Warren Meyers, a New York Stock Exchange specialist with Walter J. Dowd, told CNNfn's Street Sweep.
After the close of trade, online retailer Priceline.com (PCLN: up $0.01 to $1.85, Research, Estimates) reported a profit of 3 cents a share for its June quarter, in line with estimates and higher than a year earlier. The company also said that its third-quarter earnings per share might miss estimates by a penny and that it will buy back up to $40 million of common stock. Graphic-design software maker Adobe Systems (ADBE: down $0.98 to $23.96, Research, Estimates) warned that its third-quarter results will miss estimates due to weak demand in Europe and Asia.
Two Dow components: No. 1 oil company Exxon Mobil (XOM: up $1.09 to $36.76, Research, Estimates) and media company Walt Disney (DIS: up $0.29 to $17.73, Research, Estimates) are expected to report results Thursday. In addition, the Institute of Supply Management's July survey of purchasing managers, a closely watched manufacturing indicator, and reports on construction spending and auto and truck sales are among the economic data due.
A warning from graphics chipmaker nVidia and a few specialty retailers contributed to selling on the Nasdaq Wednesday. A late-day announcement from Johnson & Johnson helped the Dow overcome broad losses earlier in the session. Among the bigger decliners: IBM, following a multibillion-dollar buyout of PricewaterhouseCoopers' consulting unit.
The economy grew at a slower pace than expected in the second quarter, the government said, confirming a sluggish economic recovery following the first recession in a decade. The initial reading of gross domestic product annual growth was 1.1 percent, down from a revised 5 percent in the first quarter. Economists surveyed by Briefing.com were expecting a reading of 2.3 percent growth.
In addition, the National Association of Purchasing Management-Chicago's closely watched survey of regional manufacturing activity declined to a reading of 51.5 in July from a revised 58.2 in June. Economists were expecting a reading of 56.5.
"The belief has been that if the economy is recovering and corporate profits are improving, equity markets will fall in line eventually," said John Davidson, president of PartnersRe Asset Management. "I believe this will still prove to be true, but there's fear that if the economic recovery is slowing, stocks may not catch up as soon."
In other economic news, the Fed's "beige book" report on economic conditions, released mid-afternoon, showed modest growth across a variety of sectors and regions, amid mixed retail sales, an improving manufacturing sector and a relatively stable labor market.
Another factor in trading was news that an explosion at Hebrew University in Jerusalem has left at least seven people dead and more than 80 injured.
Chips and retailers slide
Several issues contributed to the Nasdaq's decline.
Graphics chipmaker nVidia (NVDA: down $5.15 to $11.07, Research, Estimates) warned late Tuesday that revenue for its just-completed second quarter will come in at breakeven due to weakness in demand for personal computers. Analysts currently expect earnings of 40 cents per share. On Wednesday, Merrill Lynch cut its earnings estimates on nVidia to reflect the warning. The warning impacted the rest of the sector, with the Philadelphia Semiconductor index, or Soxx, losing 5.5 percent.
In addition, retailers were weaker after apparel chains Hott Topic (HOTT: down $6.90 to $15.55, Research, Estimates) and Children's Place Retail Stores (PLCE: down $3.35 to $18.96, Research, Estimates) both warned that slowing sales will hurt the current quarter and second half of the year.
"The market is going down for a few reasons. You have weak economic numbers, the nVidia warning hurting techs, and a continued, very natural selloff after such a fast move to the upside in the last week or so," said Peter Green, a market analyst at MKM Partners.
On the Dow, computer hardware leader IBM (IBM: down $1.39 to $70.40, Research, Estimates) agreed late Tuesday to acquire PricewaterhouseCoopers' consulting unit for $3.5 billion.
But financial services company American Express (AXP: up $1.34 to $35.26, Research, Estimates) helped temper some of the losses, following a brokerage upgrade. In addition, late in the session, Johnson & Johnson (JNJ: up $2.06 to $53.00, Research, Estimates) rose after saying that it will receive incremental reimbursement for its coated stents starting April 1, 2003. Merrill Lynch issued a note saying that this is good news for the drugmaker and may hurt competitors.
AOL confirms DOJ probe
The Justice Department has joined the Securities and Exchange Commission in investigating AOL Time Warner (AOL: down $0.90 to $11.50, Research, Estimates), the company confirmed Wednesday. The media company, CNN/Money's parent, has been under scrutiny for allegations of accounting discrepancies.
Fiber-optic products maker Corning (GLW: down $0.87 to $1.60, Research, Estimates) dragged for the second consecutive session. The company lost another 18 percent, after falling 22 percent Tuesday, on a number of analyst downgrades and Moody's and Standard & Poor's cutting their debt rating on the company to "junk" status late Monday.
On an up note, Lehman Brothers raised its rating on American Express to "strong buy" from "market perform," citing confidence in management's ability to deliver earnings in a tougher revenue climate and a valuation level that should begin to increase over the next year.
Energy companies on the New York Stock Exchange rocketed higher as well, with Dynegy (DYN: up $0.66 to $2.40, Research, Estimates) adding more than 45 percent.
European bourses closed mixed, while Asian-Pacific stocks finished mostly lower Wednesday.
Treasury prices rallied, pushing the 10-year note yield down to 4.46 percent from 4.58 percent late Tuesday. The dollar rose versus the euro and was lower versus the yen.
Light crude oil futures fell 34 cents to $27.02 a barrel in U.S. trading, where gold declined.
Market breadth was mixed. On the New York Stock Exchange, advancers edged decliners as 1.91 billion shares changed hands. On the Nasdaq, losers beat winners by almost 4-to-3 as 1.57 billion shares traded.