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Intel Downgrade Hits Stocks; Transports Rise

Published: Tuesday, 3 Nov 2009 | 11:27 AM ET

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By: CNBC.com

Stocks tumbled Tuesday, led by techs after an analyst downgrade on Intel. Transports rose following news that Warren Buffett is buying Burlington Northern railroad.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

Intel [INTC Loading... () ] was one of the biggest drags on the Dow after after Morgan Stanley downgraded the semiconductor giant to "equal-weight" from "overweight," and cut the entire industry to "cautious" from "attractive."

The Philadelphia Stock Exchange semiconductor index was down more than 2 percent.

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Johnson & Johnson [JNJ Loading... () ] announced plans to slash about 7,000 to 8,000 jobs, which amounts to 6 to 7 percent of its workforce.

The big buzz in the market this morning was that Warren Buffett's Berkshire Hathaway [BRK.B Loading... () ] is buying Burlington Northern Santa Fe [BNI Loading... () ] for $100 a share in a deal valued at $26 billion. Simultaneously, Buffett said Berkshire is offering a 50-for-1 stock split for its Class B shares.

Burlington Northern shares shot up more than 25 percent.

The news gave a boost to transports — and not just railroad stocks. FedEx and UPS rose, as did major airlines. The Dow Jones transportation index was up more than 4 percent.

But Ford [F Loading... () ] and other auto makers declined ahead of auto sales, which will start to trickle out shortly. Analysts say sales likely rose last month but caution that they are still at 1980s levels.

Industrial and material stocks continued to benefit from the encouraging manufacturing readings from all over the globe yesterday: Dow componets Caterpillar, DuPont and United Technologies all advanced, despite the overall downward pull on the market today.

It's been a big week for M&A activity: On Monday, Stanley Works [SWK Loading... () ] agreed to buy rival tool maker Black and Decker [BDK Loading... () ] in an all-stock deal valued at $3.5 billion, based on Monday's closing prices, plus the assumption of debt.

On the earnings front, Swiss bank UBS [UBS Loading... () ] reported its fourth straight quarterly loss and missed analysts' target.

That, plus news that Britain's Royal Bank of Scotland and Lloyds Banking Group are selling hundreds of branches, rattled the U.S. banking sector. Dow components Bank of America and JPMorgan were down more than 1 percent. Citigroup and some regional banks were even harder hit.

MasterCard [MA Loading... () ] beat earnings expectations as the credit-card provider raised fees to banks and slashed expenses.

After the bell today, we'll get results from Dow component Kraft Foods [KFT Loading... () ].

Monday's session was topsy-turvy: Stocks charged out of the gate, then retreated, before staging a late rally.

The economic calendar is light today: Factory orders rose 0.9 percent in September, after a 0.8-percent drop in August, the Commerce Department reported. Economists were expecting a gain of 1 percent.

The Fed begins a two-day-meeting today. Investors will be watching for any change in the "for some time to come" language the Fed has used for current interest-rate levels. The statement is due out at 2:15 pm ET on Wednesday.