Microsoft, economy hurt stocks

Reports on housing, jobs much worse than expected. Software maker's earnings miss hurts techs.

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NEW YORK( -- U.S. stocks opened lower Thursday after Microsoft's surprise announcement that it was cutting up to 5,000 jobs over 18 months and missed earnings estimates.

Stocks were also hurt by worse-than-expected government reports on jobless claims and the housing market.

At 9:40 a.m. ET, the Dow Jones industrial average fell 1%, Standard & Poor's 500 slipped 1%and Nasdaq stocks fell 2.5%.

The dour market follows a rally on Wednesday, when the Dow Jones industrial average rose 3.5%, the Nasdaq rose 4.4% and the Nasdaq composite jumped 4.6%.

Quarterly results will dominate the markets, said Anthony Conroy, head trader at BNY ConvergEx Group.

"Earnings are pretty much the spotlight of the day, and it looks like more bad news than good news," said Conroy. "[For] any company that is super-dependent on consumer spending, it looks like they're going to get hit hard."

Tech stocks: Microsoft (MSFT') reported an 11% drop in quarterly net income to $4.17 billion, blaming the difficult economy, and announced cost management initiatives, which include sweeping job cuts.

But despite a tough environment for tech sales, Apple (AAPL, Fortune 500), the maker of the iPod and Macintosh computers, reported quarterly earnings that topped Wall Street's expectations. Apple's results come on the heels of IBM's solid quarterly earnings, which helped propel U.S. markets Wednesday. The shares were up 5% in early trading.

The earnings were in contrast to Microsoft (MSFT'), which reported an 11% drop in quarterly net income to $4.17 billion, blaming the difficult economy and cost management initiatives. Microsoft shares fell 7%.

Japanese electronics maker Sony (SNE) warned that it would report its biggest loss ever - a $2.9 billion operating loss for the fiscal year ending in March. The loss was partly due to restructuring costs, and partly because of the stronger yen, the company said.

Finland-based cell phone maker Nokia (NOK) also reported a quarterly loss of nearly $750 million.

Economy: The Labor Department reported that 589,000 out-of-work employees filed for jobless claims in the week ended Jan. 17. That was worse than the 548,000 claims that were expected, according to a consensus of economists surveyed by

The government also reported a sharp drop in housing starts and permits to annual rates of 549,000 building permits and 550,000 housing starts in December. That was worse than the annual rate of 615,000 permits and 610,000 starts that were expected by a consensus of economists surveyed by

The 15.5% plunge in housing starts brought them to the lowest level since recordkeeping began in 1959.

The reports on the housing and job markets - among the weakest sectors of the economy - are closely watched by investors.

Those readings are followed by the Energy Department's weekly report on U.S. fuel inventories, scheduled for release at 11 a.m. ET.

China: In a sign that the recession is being felt all over the world, the Chinese government reported that economic growth slowed to an annual rate of 6.8% in the final quarter of 2008. That was slightly below expectations of 7%, and brought the growth for all of last year to a seven-year low of 9%.

Bank stocks: The Cincinnati-based regional bank Fifth Third (FITB, Fortune 500) reported a net loss of $2.2 billion as it wrote down its banking business.

KeyCorp (KEY, Fortune 500) reported a loss of more than $500 million from continuing operations.

Money and oil: The dollar slipped against the yen but rose versus the euro and the British pound. Oil prices fell 78 cents a barrel to $42.77.  To top of page

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