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NEW YORK (CNN/Money) -
Stocks slumped Thursday on a mix of disappointing profit outlooks from eBay and Pfizer, worries about inflation and slower economic growth, following Wednesday's late-day rally.
After the close, Web search leader Google (Research) reported third-quarter earnings and sales that rose from a year ago and beat forecasts, sending its shares nearly 10 percent higher in extended-hours trading.
The Standard & Poor's 500 (down 17.96 to 1,177.80, Charts) index sank 1.5 percent.
The Dow Jones industrial average (down 133.03 to 10,281.10, Charts) fell 1.3 percent and the Nasdaq composite (down 23.13 to 2,068.11, Charts) lost 1.1 percent.
Small-cap stocks got hit especially hard, sending the Russell 2000 (down 10.74 to 627.54, Charts) skidding 1.7 percent.
Treasury prices slipped, boosting the corresponding yields, and the dollar slipped versus other major currencies.
After a big rally Wednesday, it wasn't too surprising to see a pullback Thursday, said Som Dasgupta, head of equity trading at PNC Financial Services Group.
But the declines may also reflect a greater worry about slowing economic growth paired with rising inflation ahead, market analysts said.
Despite Google's upbeat news, Nasdaq and S&P futures pointed to continued selling Friday morning, when fair value is taken into account.
Caterpillar, Ericsson and Schlumberger are all due to report earnings Friday. There are no market-moving economic reports due Friday.
Worried about inflation, slowing growth
Inflation worries have sent stocks tumbling for four out of the last five weeks.
Such worries were revived Thursday by the Philadelphia Fed index, released in the afternoon. The October regional manufacturing read rebounded more than expected following September's dismal reading. But while new orders and shipments rose, the prices-paid component hit a 25-year high.
Then Jack Guynn, president of the Federal Reserve bank of Atlanta, joined the slew of central bank officials cautioning about inflation and the need for continued interest rate hikes. Among his comments, Guynn noted that core inflation is almost too high.
Also not helping was the morning's weak read on September leading economic indicators, which showed a drop for the third month in a row.
U.S. light crude oil for November delivery fell $1.38 to settle at $61.03 a barrel on the New York Mercantile Exchange, after dipping below $60 earlier in the session, for the first time since July.
The declines followed the release of a report that showed a bigger-than-expected rise in natural gas inventories and news that the International Energy Agency, which met in Paris Thursday, was considering releasing more emergency oil.
As has been the case of late, while the drop in oil prices was good for investor sentiment, it was bad for oil stocks and by extension, the broader market. Energy has been the leading stock sector for all of 2005, so when it sells off, it hurts stocks overall.
"It's almost like energy is leading the market higher and lower at the same time," said Stephen Leeb, president of money manager Leeb Capital management.
The Amex Oil (down 44.49 to 912.63, Charts) index tumbled 4.7 percent.
"You would normally expect that lower energy prices would boost the stock market, but it hasn't," Leeb added. "Lower energy prices and lower energy stocks suggest that there is a broader worry about economic growth."
What moved?
Corporate news was dominated by earnings reports and forecasts.
"Most of the earnings so far have been in line or better than expected, but there have been some weaker forecasts," Dasgupta added. "Earnings news will remain the focus for the time being, with Google due after the close."
Dow stock Pfizer reported third-quarter earnings that fell from a year earlier, but were nonetheless above analysts' expectations, and revenue that fell from a year ago and missed forecasts. The world's largest drugmaker also cut its 2005 earnings forecast and withdrew its 2006 and 2007 earnings forecasts.
Pfizer (down $2.07 to $21.90, Research) shares slumped 8.6 percent.
Amgen (down $3.99 to $74.10, Research) slumped after the company reported improved quarterly revenue late Wednesday that was nonetheless short of forecasts. The biotech leader also issued an in-line 2005 forecast.
McDonald's (down $1.29 to $32.40, Research) slipped 3.8 percent after reporting quarterly earnings of 56 cents per share, a penny shy of forecasts and down from 61 cents a year ago.
eBay (down $2.94 to $39.07, Research) reported improved earnings and revenue late Wednesday. But as with Intel Tuesday night, the company also issued a current-quarter earnings forecast that was shy of some investor's expectations. Wall Street focused on the forecast and eBay shares fell.
eBay weighed on the overall Internet sector, sending the Goldman Sachs Internet (Charts) index down by 2.1 percent.
Among other movers, homebuilder stocks continued to erode. The Dow Jones Home Construction (down $17.26 to $851.79, Research) index lost 2 percent.
On the upside, Dow component Coca-Cola (up $0.30 to $42.10, Research) reported higher quarterly earnings that rose from a year earlier due to strong soft-drink sales in China and other overseas markets. Shares gained 0.7 percent.
Market breadth was negative. On the New York Stock Exchange, losers beat winner more than four to one on volume of 1.97 billion shares. On the Nasdaq, decliners topped advancers by more than two to one as nearly 1.83 billion shares changed hands.
Treasury prices slipped, raising the yield on the 10-year note to about 4.48 percent from 4.46 percent late Wednesday. Treasury prices and yields move in opposite directions.
The dollar declined versus the euro and yen.
COMEX gold fell $2.60 to settle at $463.20, after losing nearly $9 Wednesday.
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