NEW YORK (CNN/Money) -
Stocks slumped Tuesday, after a sales warning from Advanced Micro Devices and earnings misses from Alcoa and others fostered fears about the earnings reporting period.
The tech-laden Nasdaq composite (down 17.42 to 2,079.62, Charts) fell around 0.8 percent Tuesday. The Dow Jones industrial average (down 64.81 to 10,556.22, Charts) and the Standard & Poor's 500 (down 7.26 to 1,182.99, Charts) index both lost around 0.6 percent.
But investors received some good news after the bell, when chip leader Intel (Research) reported fourth-quarter earnings and sales that topped estimates. The company also issued first-quarter sales guidance in a range that sets the midpoint higher than what analysts are currently expecting.
Shares had fallen 1.5 percent during the session, ahead of the earnings, but spiked up 3 percent after the close and gave a boost to a number of other chips.
"So far the earnings season has gotten off to an underwhelming start," said Michael Sheldon, chief market strategist at Spencer Clarke. "I think the positive news from Intel is just what the market needed and is likely to lead to a favorable opening on Wednesday."
Stocks had managed modest gains Monday, the first up day for all the major gauges after a decidedly negative start for 2005. But the tone remained tentative, and the spate of negative corporate news late Monday and early Tuesday pushed stocks lower.
Among the factors weighing: a profit warning from AMD and a tough start to the fourth-quarter earnings reporting period, marked by profit misses late Monday from Alcoa and Genentech.
Declines were broad-based Tuesday, with 28 of the 30 blue chips that comprise the Dow industrials slipping.
"I think the market had been pretty weak, and then we saw a little bargain hunting Monday," said David Briggs, head of equity trading at Federated Investors. "But those same people hunting for bargains yesterday got a little spooked today when they saw the AMD warning and the Alcoa miss."
On a broader level, "I think people are still digesting the gains from the third- and fourth-quarter (of 2004), and they're a little nervous ahead of all the earnings," Briggs added.
The earnings reporting period kicks into high gear next week, but a few big names have started to trickle in already. Earnings for the fourth-quarter are expected to have risen 16 percent from the same period a year ago, according to a consensus of analysts surveyed by First Call.
Not all the Tuesday evening news was so positive. Also after the close, package delivery company UPS (down $0.32 to $83.30, Research) warned that fourth-quarter earnings per share will come in lower than previously expected, missing analysts' estimates. Shares fell more than 2 percent in extended-hours trading.
No market-moving earnings are due Wednesday morning. The one economic report of note is the November trade deficit.
The trade gap is expected to have narrowed to $54.0 billion in the month from $55.5 billion in October, according to a Briefing.com survey of economists.
AMD warns
Advanced Micro Devices (down $5.27 to $14.86, Research) warned Tuesday that fourth-quarter revenue will miss current estimates, due to rough competition in the memory chip market. AMD shares slumped 26 percent.
In addition, European chipmaker STMicroelectronics (down $0.80 to $17.76, Research) warned that profit margins would be hurt by the impact of the weak dollar, sending its shares more than 4 percent lower on the session.
The two warnings sparked worries about broader weakness in the sector, sending other chip shares lower, too.
The Philadelphia Semiconductor (down 10.06 to 396.19, Charts) index, or the SOX, fell 2.5 percent.
Among other tech decliners, Hewlett-Packard (down $0.76 to $20.05, Research) slipped 3.6 percent and was the Dow's biggest loser. Morgan Stanley downgraded it to "underweight" from "equal weight" on worries about supply chain problems and competition from Dell.
After the close Monday, Alcoa (down $0.82 to $29.65, Research) became the first Dow component to report December-quarter earnings. The aluminum producer reported earnings of 39 cents per share, 3 cents less than expected and up from 37 cents a year earlier.
While the company reported higher revenue on aluminum sales, earnings were down due to costs related to selling certain non-core businesses, as well as higher material costs. Shares fell 2.7 percent.
Genentech (down $3.73 to $50.70, Research) also reported earnings late Monday. The biotech said it earned 21 cents per share, a penny short of estimates, but up from 14 cents a year earlier. The company also forecast fiscal year 2005 earnings per share growth that is shy of expectations. Shares fell just under 7 percent.
Taser (down $5.95 to $14.10, Research) plunged nearly 30 percent after warning that orders for the first half of 2005 will slow due to law enforcement agencies testing out competitors' stun guns.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by nearly five to three on volume of 1.48 billion shares. On the Nasdaq, decliners topped advancers by more than two to one on volume of 2.23 billion shares.
U.S. light crude oil for February delivery rose 35 cents to settle at $45.68 a barrel on the New York Mercantile Exchange.
Treasury prices rose, pushing the yield on the 10-year note down to 4.24 percent from 4.27 percent late Monday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar fell versus the yen and was barely lower versus the euro.
COMEX gold rose $3 to settle at $422.40 an ounce, rising with other dollar-traded commodities.
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