Oracle sinks Nasdaq; Dow, S&P hold firm

NEW YORK Wed Dec 21, 2011 4:23pm EST

Traders work on the floor of the New York Stock Exchange December 13, 2011.     REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange December 13, 2011.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Technology shares slumped on Wednesday and pushed the Nasdaq down 1 percent after Oracle reported results that cast doubts on the sector's health, even as broader markets closed mostly flat in a thinly traded day.

Outside the Nasdaq, the market recovered from early losses as some recent fears over Europe faded. Traders tried to build momentum for a year-end rally and possibly erase the S&P 500's 1.1 percent losses so far in 2011.

After Tuesday's close, Oracle Corp ORCL.O reported earnings and sales that missed expectations for the first time in a decade. The software giant joins a growing list of companies, including some of technology's biggest and oldest names, whose results and outlooks have raised alarm bells about business conditions.

The stock plunged 12 percent to $25.77 on heavy volume and was the top decliner in the Nasdaq 100 .NDX. Shares of other tech companies also fell. IBM (IBM.N) was the biggest drag on the Dow, down 3.1 percent at $181.47. Cisco Systems Inc (CSCO.O) lost 2.6 percent to $17.92 at the close. The Philadelphia semiconductor index .SOX fell 1.2 percent.

"Oracle is a tech story, but there's concern it could be a broader economic story," said Brad Sorensen, director of market and sector analysis at Charles Schwab in Denver. "We're not ready to go that far yet, but it does show that businesses are unsure about the economic situation, especially with all the uncertainty about Europe."

Despite that, Sorensen said the light volume ahead of the Christmas and New Year's holidays would exacerbate market volatility, making the moves "a little more dramatic than normal."

The Dow Jones industrial average .DJI rose 4.16 points, or 0.03 percent, to 12,107.74. The Standard & Poor's 500 Index .SPX gained 2.42 points, or 0.19 percent, to 1,243.72. The Nasdaq Composite Index .IXIC slid 25.76 points, or 0.99 percent, to 2,577.97.

For the year, the Dow is up 4.6 percent while the Nasdaq is down 2.8 percent.

In Europe, investors worried that cut-rate loans from the European Central Bank's recent funding operation would not be used to buy Italian and Spanish debt, which would help lower elevated yields and reduce the pressure on refinancing for the debt-stricken countries.

European banks took nearly 490 billion euros in three-year cut-price loans from the European Central Bank on Wednesday. While a widening of the yield spread between German and Italian debt initially suggested that money was not flowing where it is most needed, those concerns faded toward the end of the day.

"As investors digest what the ECB is doing, there's some recognition of the fact that European banks are better off having more money on their balance sheets even if it isn't being lent out," said Mike Shea, a managing partner and trader at Direct Access Partners LLC in New York.

An Italian banking group said banks would not increase their exposure to sovereign debt even after the ECB offering because European Bank Authority rules discourage it.

Ryan Larson, head of equity trading at RBC Global Asset Management in Chicago, said unconfirmed talk was circulating in the market that banks would use ECB loans to buy German bonds and not to support the debt of Spain and Italy.

"That kind of spooked the market," he said. "While it is a positive development in terms of the lending facility, there are still a lot of problems out there."

He said he was not able to confirm any of the market speculation.

Tuesday's rally had lifted the S&P 500 above its 50-day moving average. Many investors and traders are looking for a seasonal "Santa rally" through the end of the year and are keen to jump on any signs of momentum.

U.S.-listed shares of Research in Motion Ltd RIMM.ORIM.TO jumped 10.1 percent to $13.78 and ranked as the Nasdaq 100's top gainer after Reuters reported that Amazon (AMZN.O) and other potential bidders had been looking at making an offer for the BlackBerry maker, although interest had cooled somewhat.

The latest economic data showed sales of previously owned U.S. homes surged in November, but revisions to data for the last four years gave proof that the housing market's recession was deeper than previously thought.

Contract electronics manufacturer Jabil Circuit Inc (JBL.N) posted first-quarter revenue below estimates and said it sees lower revenue in the second quarter. Shares fell 2.8 percent to $19.40.

Volume was light, with about 6.52 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 8.47 billion.

About 59 percent of companies traded on the New York Stock Exchange closed in positive territory while about 48 percent of the Nasdaq ended lower.

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)

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Comments (4)
breezinthru wrote:
This move will perhaps strengthen Eurozone banks, but the budgets of sovereign nations will remain dysfunctional… their debts, too large to manage… their economies unable to provide sustainable opportunities for the unemployed.

The impact of technology and globalization cannot be softened by enriching the financial sector.

Dec 21, 2011 8:04am EST  --  Report as abuse
Intriped wrote:
New Tax is all it amounts toooooo!!

Dec 21, 2011 10:24am EST  --  Report as abuse
FBreughel1 wrote:
LOL, first all are claiming a possible credit crunch ALSO in Europe, whereupon Mr. Draghi expands credit facility with a huge succes and now people are crying again because it might not be used for the sovereign debt! Talking about inconsistency.

Read my words: All major EU banks are going to contribute to the EU sovereign debt as their governments will be putting some gentle pressure on them. In fact, I won’t be surprised if some of the ECB 1 % interest rate will turn up in equal bids from respective locally bound banks. Do you think these guys want to put their money into “heading for disaster” US/UK when they can get a low risk profit at home ? Oh, we will see a credit crunch all right – especially as euros and investments return from Asian and US markets. Good luck with financing the horrific 9-10% deficit gaps again in 2012. All is not paid for, as Timmy will find out.

Dec 21, 2011 11:16am EST  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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