Investors also considered strong employment data. Crude futures jumped above $75, touching an all-time high
Stocks finished sharply lower Wednesday, as missile tests by North Korea weighed on sentiment amid record-high oil prices. Profit-taking after recent gains probably exacerbated stock weakness, while a solid report on the labor market fanned concerns about inflation and further interest-rate hikes, says Standard & Poor's Equity Research.
The Dow Jones industrial average fell 76.2 points, or 0.68%, to 11,151.82, led downward by Intel (INTC ) after UBS lowered its earnings forecast for the chipmaker. The broader Standard & Poor's 500 index shed 9.28 points, or 0.72%, to 1,270.91. The tech-heavy Nasdaq composite tumbled 37.1 points, or 1.69%, to 2,153.34.
NYSE breadth was decidedly negative, with 24 issues declining for every 9 advancing, while NASDAQ breadth was 21-10 negative.
However, strong corporate profits could help buoy stocks in the weeks and months ahead, some analysts say. "It is my belief that the rally we've seen over the last few days is the beginning of something that has more legs," notes Ed Keon, senior vice president and director of quantititative research with Prudential. "I expect earnings to be terrific, up 13%-15%. I think stocks are going to do well between now and the end of the year and think that the people who think we are going to sit in the doldrums over the summer are going to be mistaken."
The economy may have reached a key turning point, others say. "The outlook for the U.S. economy and interest rates is now at a crucial juncture," says Mark Miller, an economist at HBOS Treasury Services. "Growth appears to be slowing under the weight of higher energy prices and prior policy tightening."
Traders returned from the July 4 holiday to find geopolitical concerns back in the spotlight Wednesday. North Korea reportedly launched seven missiles early Wednesday, among them a long-range Taepodong-2 considered capable of reaching U.S. soil.
nvestors were also sifting through surprisingly strong jobs data. The ADP national employment report showed a net gain of 368,000 jobs in June, much higher than expected, after a 122,000 rise in May. The figures are fanning speculation about a similar jump in Friday's closely watched payrolls report, says S&P Equity Research.
Another labor report showed a different picture. The Hudson employment index was little changed at 102.4 in June, after a reading of 102.3 in May.
Also on the economic docket, U.S. factory orders rose 0.7% in May, slightly above expectations, following a revised 2.0% decline in April.
The economic calendar is busy again Thursday. Interest-rate decisions are due from the Bank of Japan and the European Central Bank. Data releases include weekly unemployment claims and a June reading of the Institute for Supply Management's index of non-manufacturing business activity.
On the company side Wednesday, AT&T (T ) was little changed after Bank of America upgraded the phone giant from neutral to buy, citing valuation.
Shares in MasterCard (MA ) rose modestly after Citigroup initiated coverage of the credit-card company with a buy recommendation.
Other stocks in focus include Nissan (NSANY ) after the automaker's board approved proceeding with exploratory discussions related to a potential alliance with U.S. rival General Motors (GM ).
In technology, Google (GOOG) was slightly lower even after Merrill Lynch raised its estimates for the Internet search company's second-quarter earnings and revenue.
Shares in Apple (AAPL) fell after the computer maker announced a new model of its iMac computer for the education market. The machine will sell for $899 to customers that qualify for Apple's educational discount, compared to $1,299 for the cheapest iMac without the special pricing.
On the M&A front, Univision (UVN ) was lower after media company Televisa (TV), which owns an 11.4% stake in the Spanish-language broadcaster, declined to participate in Univision's merger with a consortium of investors.
Meanwhile, Oracle (ORCL ) was lower following a report the software maker plans to buy Asian companies to win market share.
Elsewhere, Maxim Integrated Products (MXIM) was lower on reports the circuit maker has received a subpoena from the U.S. Attorney's office as part of an investigation into stock-options practices.
A figure in an earlier market scandal also returned to the news. Convicted Enron founder Ken Lay reportedly died of a heart attack Tuesday night in Aspen, Colo. His sentencing for fraud and conspiracy related to the energy company's collapse had been scheduled for Oct. 23.
In the energy markets Wednesday, August West Texas Intermediate crude oil futures closed up $1.26 to $75.19 a barrel, after touching an all-time high of $75.40. Iran postponed talks with the European Union over the Mideast nation's nuclear program, helping drive the energy complex higher.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index dropped 56.8 points, or 0.97%, to 5,826.7. Germany's DAX index skidded 103.38 points, or 1.8%, to 5,625.63. In Paris, the CAC 40 index was down 62.58 points, or 1.26%, to 4,921.3.
Asian markets finished lower amid worries about North Korea's missile launches. Japan's Nikkei 225 index fell 114.56 points, or 0.73%, to 15,523.94. In Hong Kong, the Hang Seng index lost 101.8 points, or 0.62%, to 16,326.66. Korea's Kospi index declined 6.07 points, or 0.47%, to 1,279.85.
Treasury yields pushed higher on the strong ADP job-market report. The 10-year note fell in price to 99-07/32 for a yield of 5.22%, while the 30-year bond dropped to 88-17/32 for a yield of 5.27%.