Stocks End Mixed as Big Tech Names Drop
CNBC.com Senior Writer
Stocks clawed back much of the day's earlier losses, closing mixed to lower as a sharp drop in technology shares outweighed and otherwise positive day for the market.
Technology represented the only negative sector on the Standard & Poor's 500, but that was enough to drag the index to a modestly higher close. Utilities, consumer staples and energy performed best for the index. Big tech names also hurt the Dow industrials, and the Nasdaq lost about 1 percent for the day.
More developments in Europe and weakness in tech earnings dominate the day's market themes.
Oraclewas in the spotlight after it posted earningsthat fell short of Wall Street's forecasts for the first time in a decade after the bell on Tuesday. Oracle's software and hardware sales sputtered, stoking fears a global recession will hurt tech spending. Credit Suisse kept its outperform rating on the company but lowered its price target from $42 to $40 a share.
The company helped make the Nasdaqthe worst of the major indices, with more than double the losses of its counterparts. The PHLX Semiconductor Index fell about 1.2 percent for the day.
On the Dow, General Electric and Coca-Cola led gainers, while a big drop in IBM kept any gains in check for the bluechips.
Elsewhere, the European Central Bank offered 489.2 billion euros ($643.8 billion) in an auction of three-year loans, much higher than estimated, with a total of 523 bidders. The move is part of the ECB's Long-Term Refinancing Operations, or LTRO.
Markets initially reacted sharply positive in hopes the move would help forestall contagion effects from overwhelming debt in the nations known as the PIIGS — Portugal, Italy, Ireland, Greece and Spain.
But it soon became clear there would be plenty more work to be done.
"What we don’t know, and this is why market sentiment is withering so far on Wednesday, is whether or not the record amount of borrowing will end up in the real economy spurring job growth and consumer demand," said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York. "The ECB’s action certainly created a high for the patient, but is no panacea especially for sovereign bonds."
Also in Europe, Franklin Templeton's Mark Mobius, considered a pioneer in emerging market investment, said he expects the sovereign debtcrisis to be resolved by mid-year in 2012.
"The European crisis isn't as deep and terrible as people think," Mobius said, according to a Reuters report. "Nations there are in a process of negotiations and that takes time."
With trading activity winding down heading into Christmas weekend, volume was thin, with about 820 million shares changing hands on the New York Stock Exchange. Winners beat losers 1.5 to 1.
Walgreen earnings also left the market disappointed after the retail pharmacy chain posted profit of 63 cents a share, four cents below estimates.
Sears Holdings fell sharply, though retail stocks rebounded and finished positive for the day.
Pharmaceuticals were among the market's best performers, with shares of Amgen also strong.
Bank stocks gained 1 percent, though investment banker Jefferies shares plunged, turning around gains the company had seen following a solid earnings report Tuesday. Analyst Meredith Whitney downgraded the stock and others warned that the company had continued problems ahead, after it seemingly soothed investor concerns about its exposure to European debt.
In economic news, the National Association of Realtors also said home saleswere less than expected in November, growing 4 percent to an annualized rate of 4.42 million, against expectations of 5.05 million.
Housing has been a point of contention in the market lately. Data Tuesday showed housing starts and building permits up much higher than anticipated; the numbers, though, remain well below what would be considered normal for a healthy market.
Builders had been lower for much of the day but turned around in the afternoon, reflected in a gain for the SPDR S&P Homebuilders ETF.
"Our view in aggregate is still to underweight the homebuilding sector," Michael Widner, housing analyst at Stifel Nicolaus, said in a research note. "Volatility and uncertainty move stocks both ways, and we generally like current valuations much more as exit than entry points."
Contract manufacturer Jabil Circuit posted quarterly revenue below analysts' estimates as its large customers battled inventory pile-ups, and sees lower revenue in the second quarter from its high-velocity segment which services digital products.
Paychex posted quarterly profit that beat market expectations helped by revenue growth in its payroll processing and human resources businesses, and said it continues to see a slow economic recovery with respect to sales from new clients.
Battered Research in Motion shares also rebounded on news that the company had drawn interest from Microsoft, Amazon and Nokia.
A payroll tax cutfor 160 million American workers was in limbo on Wednesday with Democrats and Republicans in the U.S. Congress accusing each other of bringing an extension to a dead stop.
The issue is important for the impact it could have on growth projections in 2012.
Nomura Securities economist Lewis Alexander said he expects a resolution in Congress. Failing to extend both the tax cut and unemployment benefits, he said, would lop 0.8 percentage points off next year's gross domestic product growth — a critical move being that the firm sees 2012 GDP at just 2.3 percent even with both measures.
"If these policies are not extended, the effect on our outlook for 2012 would be material," Alexander said. "The way Congress has handled this issue over the last week has generated substantial uncertainty."
In mergers and acquisition news, Delphi Financial Group soared on news that Tokio Marine Holdings will buy the financial services holding company in a deal worth $2.7 billion.
In economic data, the Mortgage Bankers Associationreported a decrease in home-loan demand last week.