Tech worries slam Nasdaq
Composite knocked lower for second session after Apple's forecast disappoints; rise in inflation measure, surprise bounce in housing, falling oil prices, Bernanke speech also have impact.
NEW YORK (CNNMoney.com) -- The Nasdaq composite slumped Thursday afternoon, falling for a second session after Apple's earnings forecast raised worries about the strength of technology earnings in the just-completed fourth quarter.
The Nasdaq (down 25.21 to 2,454.21, Charts) composite lost around 1 percent nearly 3 hours into the session, dragged down by Apple.
The Dow Jones Industrial average (down 0.25 to 12,576.90, Charts) was little changed, after touching an all-time trading high during the previous session. The S&P 500 (down 2.63 to 1,427.99, Charts) index dipped modestly after hitting a more than six year high Tuesday.
Disappointment about Intel's earnings weighed on stocks Wednesday. Concerns about tech earnings remained in focus Thursday, with investors ignoring Apple's blowout first-quarter earnings and instead focusing on its lighter-than-expected Mac sales and the company's second-quarter forecast.
The PC and iPod maker issued fiscal second-quarter sales and earnings guidance late Wednesday that was short of analysts' forecasts. Apple (down $4.43 to $90.52, Charts) shares slipped 4.5 percent Thursday morning and dragged on other tech shares. (Full story)
"People were disappointed with Apple, but expectations were also too high," said Ned Riley, chief investment strategist at Riley Asset Management. "Clearly, the business is growing, but maybe not with the kind of magnitude that some people have been hoping for."
Riley said that tech stocks were also perhaps vulnerable after having taken an early lead in 2007.
Outside the tech sector, the broader market was mixed as investors weighed encouraging reports about the housing market and a decline in oil prices with a rise in a key measure of inflation and cautious words from the chairman of the Federal Reserve Board.
Insofar as the economic news, "this is a period when good economic news is seen as bad, in terms of people's interpretations of inflation trends," Riley added.
Inflation and the Fed
Investors sorted through the morning's economic news, including the December Consumer Price Index (CPI). CPI rose 0.5 percent in the month, the government said, topping forecasts. Core CPI, which strips out volatile food and energy prices, rose 0.2 percent in the month, in line with forecasts.
The report did little to quell inflationary worries raised by Wednesday's reading on producer prices. However, the CPI is also a backward-looking indicator, and with oil prices having slumped considerably since December, future reports could show lower pricing pressures.
Investors also welcomed a surprisingly robust read on December housing starts and building permits, suggesting the battered housing market could be bottoming. (Full story).
Also a factor: Federal Reserve chairman Ben Bernanke, who spoke before Congress Thursday morning on the threat of the growing U.S. budget deficit and the impact of an aging population on the economy.
Stocks have been choppy of late as market participants have attempted to come to terms with the reality that the Federal Reserve is not likely to cut interest rates in the near term - despite bets last year that it would do so.
On the move
In addition to Apple, a variety of large, widely-held technology shares slipped as well, including Dell (down $0.38 to $25.46, Charts), Hewlett-Packard (down $0.35 to $42.14, Charts), Cisco (down $0.44 to $26.54, Charts) and Oracle (down $0.29 to $17.23, Charts).
Chip gear maker Lam Research (Charts) slumped 13 percent in active trading after warning that shipment delays will weigh on the current quarter's results. That overshadowed the company's otherwise upbeat second-quarter earnings.
Lam weighed on other chips, sending the Philadelphia Semiconductor (down 14.76 to 457.87, Charts) index down 2.8 percent.
On the upside, Merrill Lynch reported quarterly earnings that jumped from a year ago and topped analysts' expectations, thanks to a gain in M&A advisory fees and strength in its private equity business. Merrill (up $0.19 to $97.00, Charts) shares were little changed.
Market breadth was negative. On the New York Stock Exchange, losers topped winners eight to seven on volume of 780 million shares. On the Nasdaq, decliners trounced advancers by more than two to one as 1.25 billion shares changed hands.
Treasury prices were modestly higher, with the yield on the benchmark 10-year note falling to 4.77 percent from 4.78 percent late Wednesday.
In currency trading, the dollar gained versus the yen and slipped versus the euro.
U.S. light crude oil for February delivery slumped $1.69 to $50.55 a barrel on the New York Mercantile Exchange, falling after a surprisingly strong weekly energy inventories report.
COMEX gold for February delivery gained 10 cents to $633.40 an ounce.