Intel batters stocks

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NEW YORK (CNNMoney.com) -- Stocks tumbled Wednesday, with investors giving up a late-session attempt at a rally, as disappointment about Intel's earnings and outlook and more worries about the economy caused another sell off on Wall Street.

The Dow Jones industrial average (INDU) lost 0.3 percent, ending at a fresh 9-month low. The broader S&P 500 (INX) index lost 0.6 percent, ending at a fresh 10-month low. The Nasdaq composite fell 1 percent and ended at an almost 10-month low.

Intel (INTC, Fortune 500) reported quarterly results and an outlook late Tuesday that disappointed investors. Its shares slipped more than 12 percent Wednesday and dragged on a variety of other technology shares.

Earnings will continue to dominate trade Thursday, with Merrill Lynch and a number of other financial services firms due to report quarterly results before the start of trade.

The December housing starts and building permits reports are also due before the start of trade.

Stocks have taken a beating so far this year on worries that the current credit crunch is sending the economy into a recession - if it isn't there already. Year-to-date, the Dow is down around 6 percent as of Wednesday's close, and the S&P 500 is down around 6.5 percent, while the Nasdaq is down close to 10 percent.

Treasury prices slumped Wednesday, boosting the corresponding yields, while the dollar bounced back versus other major currencies. Oil and gold prices slumped.

Citigroup's big quarterly loss and weak Dec. retail sales amplified recession concerns, sending stocks lower Tuesday.

The broader worries remained in place Wednesday, but after such a big sell off in such a short period of time, investors were willing to scoop up select stocks. Wall Streeters were also perhaps relieved because the morning's inflation report, the Consumer Price Index (CPI), showed pricing pressure is contained.

"It gives the Fed even more freedom to move to keep us from falling into a recession, if we are not in one yet," said J. Stephen Lauck, CEO and portfolio manager at Ashfield Capital Partners.

Investors have been clamoring for the Fed to cut interest rates more aggressively at the next policy meeting that ends Jan. 30. Some on Wall Street are also calling for the central bank to step in ahead of the meeting to help stabilize markets.

A Citigroup report said the stock market is behaving as if a recession is unavoidable. If the threat of recession does become a reality, stocks probably have a lot further to fall, the report said.

Separately, the Merrill Lynch Global Fund Managers' survey for January shows that nearly 20 percent of respondents think a global recession is likely or very likely over the next 12 months.

Whether the economy really is in a recession - generally defined as two quarters in a row of declining GDP growth - or is just in a very sluggish period may not make much of a difference to the stock market.

"We're seeing a sharp stock correction that reflects that if we are not in a recession, we are close to it," Lauck said.

Additionally, many industries probably are in a recession now, even if the broad economy isn't, he said, including automakers, retailers, select financial sectors and housing.

The afternoon release of the Fed's "beige book" periodic reading on the economy showed that growth increased a bit during the survey period of mid-November through December, but at a slower pace than in the previous period.

The broad tech sector slumped, but managed to trim even bigger afternoon losses.

Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500) and Yahoo! (YHOO, Fortune 500) joined Intel among the big technology shares dragging on the Nasdaq.

One tech standout was BEA Systems (BEAS), which jumped 18.5 percent in active Nasdaq trade on reports that it agreed to be bought by Oracle in an $8.5 billion all-cash deal. Oracle (ORCL, Fortune 500) stock gained nearly 3 percent.

A decline in oil and gold prices dragged down energy and metal stocks, with the Amex Oil Services index losing 3 percent and the Amex Gold Bugs (HUI) index down 4.5 percent.

JP Morgan (JPM, Fortune 500) reported weaker earnings that missed estimates amid a $1.3 billion writedown for bad mortgage debts. But the financial leader also reported higher revenue that topped estimates.

JP Morgan shares gained around 7 percent and helped lead a bounce back in financials, one of the sectors hit hardest in the recent decline.

Fellow bank Wells Fargo (WFC, Fortune 500) reported weaker quarterly earnings due to a big subprime hit as well. However, the bank's earnings topped forecasts by a penny, sending shares higher.

The Amex Securities Broker/Dealer (XBD) index was down almost 10 percent year-to-date as of Tuesday's close. It rose 2 percent Wednesday, with stocks such as Lehman Brothers (LEH, Fortune 500), Goldman Sachs (GS, Fortune 500) and Merrill Lynch (MER, Fortune 500) all gaining.

Also helping those stocks: news reports that Bear Stearns upgraded the financial sector to "market weight" from "underweight."

Home Depot (HD, Fortune 500) and Wal-Mart (WMT, Fortune 500) led the list of retailers bouncing back. Biotech, health care and homebuilder stocks recovered a bit as well.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by a slim margin on volume of 2.10 billion shares. On the Nasdaq, advancers edged decliners eight to seven on volume of 3.5 billion shares.

In economic news, the December Consumer Price Index (CPI) rose 0.3 percent versus a year ago, while CPI at the core level - which strips out volatile food and energy - rose 0.2 percent. Economists surveyed by Briefing.com expected both CPI and core CPI to rise 0.2 percent.

Another report showed industrial production was flat in Dec., versus forecasts for a rise of 0.2 percent, while capacity utilization was 81.4 percent versus forecasts for 81.2 percent.

Additionally, the Joint Economic Committee held the first of several hearings in Washington on what action the Federal Government should take to help avoid a recession.

Treasury prices slumped, raising the yield on the 10-year note to 3.73 percent from 3.68 percent late Tuesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar rallied versus the euro and gained against the yen.

U.S. light crude oil for February delivery fell $1 to settle at $90.84 a barrel on the New York Mercantile Exchange after the government's weekly inventory report showed a surprise jump in crude stocks.

COMEX gold for February delivery fell $19.40 to settle at $882 an ounce.