NEW YORK (CNNMoney.com) -- Stocks trimmed losses by the close Thursday, but remained deep in the red, with techs falling after cautious outlooks from Qualcomm and Motorola. Ongoing worries about the labor market also gave investors a reason to retreat.
The Dow Jones industrial average (INDU) lost 115 points, or 1.1%. The S&P 500 index (SPX) fell 13 points, or 1.2%. The Nasdaq composite (COMP) lost 42 points, or 1.9%. The Dow & S&P 500 closed at nearly three-month lows and the Nasdaq closed at a 2-month low.
Stock declines were broad based, with 23 of 30 Dow components falling, led by IBM (IBM, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), Microsoft (MSFT, Fortune 500), McDonald's (MCD, Fortune 500), 3M (MMM, Fortune 500) and Caterpillar (CAT, Fortune 500).
"I think there is a sense that the economic recovery will take longer than had been anticipated and that the stock market got a little ahead of itself," said Doreen Mogavero, CEO at Mogavero Lee & Co. and an NYSE floor trader.
The S&P 500 rallied 23% last year and gained 65% since the March 2009 bottom. So far, in 2010, the S&P 500 has lost just short of 3%, as of Thursday's close.
Stocks may be in for more selling in the short run. "I think for the next few months, you're going to see not necessarily a down market, but a consolidating market," Mogavero said.
Weaker-than-expected economic readings on durable goods orders and unemployment were also in play Thursday, overshadowing President Obama's push for jobs. Ford Motor's first annual profit in 4 years and other positive profit news were mostly ignored.
Later in the day, Fed Chairman Ben Bernanke was confirmed for a second term after heavy lobbying by Democrats and the Obama administration.
Worries that Bernanke's term might not be renewed were among the factors that roiled markets last week. But concerns about the Obama administration's plans to impose greater regulations on banks and China's lending curbs really drove the selling, sending the major gauges down 5% in three sessions.
Tech stocks tumble: Technology in particular had a rough session Thursday, with telecom and semiconductors leading the decline.
"Tech is getting smashed and that's spread to the rest of the market," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.
He said that a weak outlook from Qualcomm was dragging on semiconductors and, by extension, the broad technology sector. Motorola also gave a weak outlook, adding to the selling pressure.
In addition, the Nasdaq's run over the last year has outpaced that of the other major indexes and investors may be looking to cash out, particularly amid broader worries about the economy and banking sector.
"There's been a huge run-up in the market, people are worried about the deficit and unemployment and so they want to take some profits," Rovelli said.
Qualcomm and Motorola: Qualcomm (QCOM, Fortune 500), a maker of chips and other gear used in mobile phones, warned late Wednesday that a more mild outlook for the economy this year has caused it to cut back expectations.
The company cut its earnings and revenue outlook for the current quarter and the forecast overshadowed its better-than-expected fourth-quarter results. Shares fell 14% in heavy trading.
A number of chip and telecom shares fell in response, with the Philadelphia Semiconductor index, or the SOX (SOX), falling 3%.
Motorola (MOT, Fortune 500) warned Thursday that it expected to post a loss in the current quarter as it spends more to launch new smartphones. The telecom also reported a better-than-expected fourth-quarter profit that reversed a year-ago loss and stronger smartphone shipments than expected. But investors focused on the outlook, sending the stock down by over 12%.
Obama: In his State of the Union Address Wednesday night, the president said that boosting employment is his administration's "No. 1 focus in 2010" and that he was calling for a new jobs bill.
He said the administration will work on beefing up hiring in the short term and creating sustainable jobs that grow wages in the longer term.
Economy: The number of Americans filing new claims for unemployment fell to 470,000 last week, down from a revised 478,000 the previous week. Economists surveyed by Briefing.com thought claims would fall to 450,000.
Continuing claims, a measure of individuals who have been receiving benefits for a week or more, fell to 4,602,000 from 4,659,000 the previous week versus expectations for 4,593,000 claims.
A separate report showed that December durable goods orders, a measure of manufacturing, rose 0.3% after falling 0.4% in the previous month. Economists expected orders to rise 2%.
Ford Motor: The automaker reported its first profitable year since 2005 and said it expects to make money again in 2010. The company earned $2.7 billion in 2009, or 86 cents per share, easily surpassing analysts' expectations that it would post a loss of 31 cents per share.
After a brutal 2008, the broad auto sector has been recovering this year. However, Ford's recovery has outpaced rivals. The company said it benefited from increased market share in the United States and Europe, a pickup in auto sales and cost cutting. Shares gained 1%.
Quarterly results: Three Dow companies reported results Thursday morning.
3M (MMM, Fortune 500) reported higher quarterly sales and earnings that topped forecasts, due to stronger demand for its products, in particular, the units that make products for auto makers and computer and television makers. The company also raised its earnings forecast for 2010. Nonetheless, shares fell 1.9%.
AT&T (T, Fortune 500) reported higher quarterly earnings that met estimates on lower quarterly revenue that slightly surpassed estimates. The company said it added 2.7 million new wireless subscribers, thanks to continued demand for smartphones, e-readers and other electronic devices. Shares inched higher.
Procter & Gamble (PG, Fortune 500) reported weaker earnings and stronger revenue in its fiscal second quarter. However, results surpassed estimates as the consumer products maker cut costs on its products, which include brands such as Pampers and Charmin. Shares gained 2%.
Federal Reserve: On Wednesday, the central bank said that the economy is continuing to recover slowly, but that it will keep interest rates at historic lows near zero to provide support.
World markets: Global markets gained after several down sessions, impacted by China's debt curbs and S&P's warning that it may cut Japan's debt. Asian markets rallied Thursday, with Japan's Nikkei adding 1.6%. European markets also gained, with London's FTSE up 0.5% and Germany's DAX and France's CAC 40 both up 0.6%.
Commodities and the dollar: The dollar gained versus the euro and fell against the yen.
COMEX gold for February delivery fell 90 cents to $1,083.60 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.
U.S. light crude oil for February delivery fell 3 cents to $73.64 a barrel on the New York Mercantile Exchange.
Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.64% from 3.65% late Wednesday. Treasury prices and yields move in opposite directions.
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