NEW YORK (CNN/Money) -
U.S. stock markets tumbled Wednesday, with a tech-led selloff hitting the broader market. Investors ignored a spate of good news, including Microsoft's vow to return $75 billion to shareholders over the next four years.
The Nasdaq composite (down 14.79 to 1,093.88, Charts) lost about 2.2 percent and carved out a new 2004 low, closing at its lowest level since October 24 of 2003.
The Dow Jones industrial average (down 102.94 to 10,046.13, Charts) lost 1 percent, and the Standard & Poor's 500 (down 14.79 to 1,093.88, Charts) index fell 1.3 percent.
Late Tuesday, Microsoft (MSFT: up $0.54 to $28.86, Research, Estimates) announced that it will buy back $30 billion in stock, double its dividend, and pay a one-time dividend of $3 a share -- one of the biggest corporate payouts in U.S. history. The stock rose at the open and managed to hold most of those gains throughout the day, unlike the rest of the stock market.
The major indexes rose briefly at the open, along with Microsoft, before turning negative and staying there through the close.
Strong earnings from Motorola, Lucent Technologies and General Motors were ignored in the downward slide. Meanwhile, disappointing earnings and forecasts from biotech and semiconductor issues moved center stage.
Selling picked up steam in the last hour of trade, with the indexes closing at their lows for the session.
"We've got a veritable cornucopia of good news on the earnings front, but the problem is we're still contemplating some tough stuff like, 'What does the earnings deceleration look like in the second half?,' " said Art Hogan, chief market analyst at Jefferies & Co.
"I think worries about that are particularly hitting the tech sector," he said. "Plus you've had some of those companies saying things don't look as good in the second half."
After the close of trade, eBay (EBAY: Research, Estimates) reported second-quarter earnings that rose from a year earlier and topped expectations. But guidance for the third quarter and full year was shy of current expectations, and the shares dropped 5.7 percent in after-hours trade.
Earnings are due early Thursday from Caterpillar (CAT: Research, Estimates), Eli Lilly (LLY: Research, Estimates), McDonald's (MCD: Research, Estimates), UPS (UPS: Research, Estimates) and Viacom (VIA.B: Research, Estimates).
Also Thursday are the weekly jobless claims report before the bell and the June leading economic indicators after the start of trade.
Next week will see the Democratic National Convention. If that four-day conference passes without incident, the market could get a little bounce off of that, said Robert T. Mikkelsen, senior managing director of equity capital markets at the Advest Inc.
"I think there's some worry that something could happen terrorism-wise," he said. "Assuming that doesn't happen, everyone will breathe a sigh of relief, and that could provide a short-term reprieve."
What moved?
Earnings news was skewed more to the positive than the negative, but you wouldn't necessarily know that from the way the stocks of reporting companies reacted.
Sun Microsystems (SUNW: down $0.32 to $3.79, Research, Estimates) tumbled 7.8 percent after reporting results late Tuesday. The tech company beat sales forecasts on Wall Street, but it missed per-share estimates and said gross margins -- a key measure of profitability -- declined from a year earlier. The stock was initially unchanged, then tumbled in the afternoon along with the rest of tech.
Software maker Mercury Interactive (MERQ: down $4.80 to $37.93, Research, Estimates) reported quarterly earnings that missed estimates and fell from a year earlier, due to higher costs. The company also forecast third-quarter earnings of 20 cents to 27 cents a share, when analysts had been expecting 27 cents on average. Shares fell 11.2 percent in active Nasdaq trading.
Shares of ImClone (IMCL: down $15.29 to $65.44, Research, Estimates) tumbled almost 19 percent after the company reported weaker-than-expected sales of Erbitux, its key drug, used for the treatment of colon cancer. Disappointment about the sales overshadowed the company's solid second-quarter results.
RF Micro Devices (RFMD: down $0.83 to $5.73, Research, Estimates) tumbled 12.6 percent after the wireless chipmaker warned that third-quarter earnings per share would miss current expectations. The forecast overshadowed the company's better-than-expected quarterly earnings report.
A variety of semiconductor issues also fell, pushing the Philadelphia Semiconductor (down 15.66 to 407.81, Charts) index, or the SOX, down 3.7 percent.
Motorola (MOT: down $1.22 to $14.87, Research, Estimates) reported earnings and revenue that grew from a year earlier. In addition, the cell phone maker boosted its third-quarter earnings forecast and said it was gaining market share from some of its rivals in the global cell phone market. The shares gained in the morning, before retreating, as analysts released cautious notes, saying essentially that they remained neutral on the stock, thanks to continued concerns about the cell phone market.
Lucent Technology (LU: down $0.03 to $3.37, Research, Estimates) reported quarterly earnings that rose from a year earlier and topped estimates, and boosted its fiscal 2004 earnings forecast. The telecom gear maker initially gained on the news, before turning flat.
GM reported second-quarter earnings that rose from a year ago and topped estimates, due to strength in both its financing arm and main auto business. The company also said that in the third quarter it would earn between 75 cents per share and $1, with analysts forecasting 98 cents on average, according to Thomson First Call.
General Motors (GM: down $0.25 to $43.35, Research, Estimates) shares closed the session barely lower.
Providing support on the economic front was commentary from Federal Reserve Chairman Alan Greenspan before the Senate Banking Committee Tuesday and the House Financial Services Committee Wednesday. Greenspan stressed that the recent slower growth is a short-term trend and that the economy continues to accelerate, while inflation remains under control.
Market breadth was decidedly negative.
On the New York Stock Exchange, losers beat winners by more than three to two on volume of 1.67 billion shares. Volume on the Nasdaq reached nearly 2.09 billion shares, with decliners topping advancers by almost three to two.
Treasury prices fell, pushing the 10-year note yield up to 4.46 percent from 4.44 percent late Tuesday. Bond prices and yields move in opposite directions.
The dollar rose versus the yen and euro. COMEX gold fell $4.80 to settle at $397.30 an ounce, falling along with other dollar-traded commodities.
Among other commodities, NYMEX light sweet crude oil futures added 14 cents to settle at $40.58 a barrel.
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