Credit woes and tech trip Wall St day after rally
NEW YORK (Reuters) - U.S. stocks fell on Wednesday after an attempt to extend the previous session's huge rally faltered in the face of persistent worry that more fallout from the housing downturn and credit crunch lies ahead.
The Nasdaq fell the hardest as investors pulled back from the stocks that carried the index to its biggest gain in more than four years the day before. Decliners included Apple Inc (AAPL.O), Google Inc (GOOG.O) and Research In Motion Ltd (RIM.TO)(RIMM.O).
After the closing bell, shares of Applied Materials Inc (AMAT.O) sank more than 4 percent as the top supplier of tools for making microchips posted a lower quarterly profit and forecast fiscal first-quarter profit below Wall Street's estimates.
In after-hours trading, Applied Materials dropped 4.8 percent to $17.91. The stock had ended regular Nasdaq trading up 1.1 percent at $18.81 before the company's earnings announcement.
Trading in the regular session was volatile, with major indexes surging at the opening bell as oil companies' shares surged in sync with a rebound in oil prices and financial stocks rose after Bear Stearns Cos Inc BSC.N forecast additional credit losses that were not as steep as some had feared. Bear Stearns shares finished up 2.4 percent.
The Dow Jones industrial average .DJI dropped 76.08 points, or 0.57 percent, to end at 13,231.01. The Standard & Poor's 500 Index .SPX fell 10.47 points, or 0.71 percent, to close at 1,470.58. The Nasdaq Composite Index .IXIC slid 29.33 points, or 1.10 percent, to finish at 2,644.32.
"Yesterday was just a reflex rally. We're back to the good old wait-and-see posture, waiting for tomorrow's CPI announcement," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
"I think a lot of traders realize that the overall situation hasn't changed a whole lot, with yesterday's rally notwithstanding. There are more mortgage-rate resets on the horizon."
TROUBLING REPORT ON GE FUND
In news that could further shake investors' confidence when the market opens on Thursday, a report published by Barron's online edition said a General Electric Asset Management bond fund is offering investors the option to redeem holdings at 96 cents on the dollar.
The Barron's report was published online late in the afternoon, but awareness of it spread after the close.
GE Asset Management was said to have told Barron's it has ceased taking new investments in the affected fund and that it expects liquidity concerns and value dislocations to continue for the foreseeable future.
Barron's also reported that GE Asset Management cited "extreme conditions in credit markets" for an expected loss.
During the regular session, GE's stock fell 0.5 percent to $39.01 on the New York Stock Exchange.
Merrill Lynch's stock rose almost 2 percent on reports that the brokerage would hire NYSE Chief Executive John Thain as its next chief executive. Merrill confirmed the appointment after the closing bell.
In the broader market, the gains quickly gave way to profit taking, particularly in the tech sector.
A dampened sales outlook from department store operator Macy's Inc (M.N) soured initial optimism surrounding a relatively healthy reading of retail sales and sparked a drop in chain store operators' shares.
Investors were also cautious before the U.S. Consumer Price Index for October is released on Thursday. Economists polled by Reuters expect overall CPI to have increased 0.3 percent in October, while they see core CPI, excluding volatile food and energy prices, up 0.2 percent.
LEFT AT THE ALTAR
United Rentals Inc's (URI.N) announcement about 15 minutes before the market's close that buyout firm Cerberus is not prepared to proceed with the purchase of the equipment rental company fueled more downside pressure and the selling accelerated.
United Rentals shares plunged 30.3 percent to end at $23.70 and topped the list of biggest percentage losers on the New York Stock Exchange. Investors have been worried that the fallout from the credit crisis may snag takeovers proposed before the onset of the market's turmoil.
On the Nasdaq, shares of Apple, the maker of the iPhone and the iPod, closed down 2.3 percent at $166.11, while shares of Google, the Web search company, fell 2.9 percent to
$641.68.
Shares of BlackBerry devices maker Research In Motion ended down 2.3 percent at $109.95, while software maker Microsoft Corp's (MSFT.O) stock dropped 1.5 percent to
$33.93.
Shares of International Business Machines Corp (IBM.N),
the technology services company, lost 1.7 percent to $103.44 on the New York Stock Exchange, making the stock the biggest drag on the Dow.
Shares of big manufacturers also fell during regular trading as oil prices rose, with shares of Caterpillar Inc (CAT.N), the heavy equipment maker, finishing down 1.5 percent at $70.03.
NYMEX December crude CLc1 rose $2.92, or 3.2 percent, to settle at $94.09 per barrel in New York on forecasts that U.S. inventory data on Thursday will show a decline in supply in the latest week. The release of the data was delayed by one day because federal government offices were closed on Monday for the Veterans Day holiday.
Shares of Macy's slid 7.1 percent to close at $28.47 after the retailer cut its sales forecast for the current quarter and full year. An S&P index of retailers' shares .RLX fell 2.5 percent.
Even so, Bear Stearns shares climbed 2.4 percent to $103.27 after the investment bank said it expects to write down $1.2 billion of assets linked to mortgages in the fourth quarter, soothing investors who had feared multibillion-dollar write-offs.
Merrill Lynch & Co MER.N shares ended up 1.8 percent at $57.98 on the NYSE.
Volume was below average on the New York Stock Exchange, with about 1.59 billion shares changing hands, below last year's estimated daily average of 1.84 billion. On Nasdaq, about 2.51 billion shares traded, ahead of last year's daily average of 2.02 billion.
Declining stocks outnumbered advancing ones by a ratio of about 5 to 3 on the NYSE and by 3 to 2 on Nasdaq.
(Editing by Jan Paschal)
