NEW YORK (CNN/Money) -
Stocks started the second half on a sour note Thursday as investors took profits after a spate of profit warnings and downgrades, and investors awaited Friday's June jobs report.
The Dow Jones industrial average (down 101.32 to 10,334.16, Charts) and the Standard & Poor's 500 (down 11.90 to 1,128.94, Charts) index fell about 1 percent apiece.
The Nasdaq composite (down 32.24 to 2,015.55, Charts) sank 1.6 percent.
The declines were broad-based, with just four of 30 stocks in the Dow ending higher, and just barely. All 10 of the Nasdaq's most heavily weighted issues tumbled.
Stocks began mixed, fell at midmorning, then stayed in the red for the rest of the session as investors took profits across the board.
Cardinal Health, Emulex and Amkor Technology all issued profit warnings, while Yahoo! and Boeing both suffered analyst downgrades.
Weak June auto sales, higher oil prices and lackluster morning economic news added to the negative tone.
Stocks managed small gains Wednesday after the Federal Reserve, as expected, boosted the fed funds rate by a quarter-percentage point to 1.25 percent, its first rate hike in more than four years.
In its statement, the central bank acknowledged the strengthening economy and labor market, while saying that inflation was not a problem, as yet. Further providing comfort to investors, the Fed stated that should inflation increase quickly, the central bank would be able to adjust monetary policy as necessary.
While the session's negative corporate news had an impact it was more of an excuse to sell than anything else, said Mark Bryant, senior vice president at Brean, Murray.
"It's the first day of the quarter, which means there was a lot of end-of-quarter window dressing yesterday," Bryant added. "So a lot of people who bought yesterday are looking for reasons to sell today."
'Fed day' was also the last day of the second quarter and the first half, with money managers adjusting their portfolios to get set for the second half of the year.
The Fed's rate hike marked the second big event of the week, following Monday's handover of power in Iraq. The third big event is Friday's June payrolls report, although several morning economic reports added to Thursday's weakness.
Due Friday before the open, the employment report is expected to show that businesses added around 250,000 jobs to their payrolls in June, roughly in line with the 248,000 jobs added last month, according to a consensus of economists surveyed by Briefing.com. The unemployment rate is expected to hold steady at 5.6 percent.
Volume is expected to be light Friday, with many people taking off early ahead of the three-day weekend. Stock, bond and commodity markets are closed Monday for the Fourth of July.
The day's pullback wasn't terribly surprising, said Robert Mikkelsen, senior managing director of equity capital markets at Advest Inc. The Fed's rate hike was anti-climactic, investors bought ahead of that decision, and so investors took some profits Thursday, he said.
What surprised and concerned him more than the decline was that there was decent volume.
"We're at the start of the summer doldrums," Mikkelsen added. "I think we could see a little bit of a down draft over the next few weeks."
What moved?
Chips and chip equipment makers sank across the board, with the Philadelphia Semiconductor (down 18.06 to 467.03, Charts) index, the Soxx, sinking 3.7 percent.
Chip equipment maker Amkor Technology (AMKR: down $2.39 to $5.79, Research, Estimates) warned that earnings in the second quarter would be about 6 cents a share versus an earlier forecast of 17 to 22 cents, due to weaker-than-expected sales of certain high-margin products.
Other chip gear makers, including Applied Materials (AMAT: down $0.62 to $19.00, Research, Estimates), also declined.
Intel (INTC: down $0.58 to $27.02, Research, Estimates) lost more than 2 percent on some talk of bearish analyst commentary.
Schwab Soundview said in a note this morning that Intel's Grantsdale PC chips may be seeing more weakness than had been expected.
Additionally, Reuters reported that on a Morgan Stanley internal call this morning that Mark Edelstone, the analyst who covers Intel for the brokerage, said he thought Intel would lower the midpoint of its third-quarter revenue outlook. Intel is expected to discuss its upcoming quarter after its second-quarter earnings report due July 13.
Both Morgan Stanley and Edelstone's office were not immediately available. Intel declined to comment ahead of its earnings report, a spokesman said.
Yahoo! (YHOO: down $2.10 to $34.30, Research, Estimates) fell after Smith Barney downgraded the stock to "hold" from "buy."
Data storage maker Emulex (ELX: down $2.85 to $11.46, Research, Estimates) warned that earnings and revenue would miss expectations due to weak demand, sending its stock down nearly 20 percent. Customer Hewlett-Packard (HPQ: down $0.52 to $20.58, Research, Estimates) fell 2.5 percent.
Merrill Lynch downgraded Boeing (BA: down $1.19 to $49.90, Research, Estimates) to "neutral" from "buy," sending that stock 2.3 percent lower.
General Motors (GM: down $1.11 to $45.48, Research, Estimates) lost 2.4 percent after posting a sharp drop in U.S. sales in June, along with other automakers.
Drug wholesaler Cardinal Health (CAH: down $17.19 to $52.86, Research, Estimates) tumbled 24.5 percent, topping the New York Stock Exchange's most-actives list, after warning that fourth-quarter and full-year earnings will miss estimates.
It also warned about 2005 growth, citing delayed regulatory approvals of certain products, among other concerns.
Charles River Laboratories (CRL: down $5.65 to $43.22, Research, Estimates) saw its stock drop 11.5 percent after it agreed to buy Inveresk Research Group (IRGI: up $4.35 to $35.19, Research, Estimates) for around $1.5 billion in cash and stock. Inveresk surged 14 percent.
On the upside, shares of MGM (MGM: up $0.56 to $12.66, Research, Estimates) rallied 4.6 percent as a bidding war for its assets seemed to be brewing, with Time Warner (TWX: down $0.17 to $17.41, Research, Estimates) reportedly planning to throw its name in the hat, preparing an almost $5 billion offer, according to sources. Sony (SNE: up $0.21 to $38.26, Research, Estimates) is also pursuing MGM. (Time Warner is the parent of CNN/Money).
Market breadth was negative. Decliners beat advancers by nine to seven on the New York Stock Exchange where 1.48 billion shares traded. On the Nasdaq, losers beat winners by more than two to one on volume of 1.74 billion shares.
A number of morning economic reports added to the negative tone.
The number of Americans filing new claims for unemployment rose last week to 351,000 from an upwardly revised 350,000 the previous week. Economists surveyed by Briefing.com were expecting claims to come in at 343,000.
Additionally, the Institute for Supply Management's index of manufacturing activity slipped to 61.1 in June from 62.8 in May, providing some disappointment, as it was below estimates. However, a reading above 50 indicates expansion in the sector.
May construction spending rose 0.3 percent, after rising a downwardly revised 1.2 percent in April. Economists surveyed by Briefing.com were expecting it to rise 0.7 percent.
Elsewhere, Treasury prices inched higher, pushing the 10-year note yield down to 4.56 percent from 4.58 percent late Wednesday.
In currency trading, the dollar was weaker versus the yen and higher versus the euro.
And in commodities markets, NYMEX light sweet crude oil futures surged $1.69 to $38.74 a barrel. COMEX gold added $3.40 to settle at $393 an ounce.
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