NEW YORK – Stocks fell Thursday, setting lows for 2005, as disappointing earnings from eBay and a lower-than-expected profit forecast from Qualcomm added to worries about earnings growth, while a survey showed factories in the Mid-Atlantic region expanded at a slower pace than expected.
The Dow Jones industrial average (search) lost 68.50 points, or 0.65 percent, at 10,471.47. The Standard & Poor's 500 Index (search) ended down 9.22 points, or 0.78 percent, at 1,175.41. The Nasdaq Composite Index (search) was down 27.71 points, or 1.34 percent, at 2,045.88.
The declines pushed the Dow, Nasdaq and S&P to fresh lows for 2005. For the year to date, the Dow is down 2.89 percent, the S&P 500 is down 3.01 percent and Nasdaq is down 5.96 percent.
"The bad news from eBay and Qualcomm last night is like a wake-up call for investors, and they may start pruning their portfolio," said Steve Goldman, market strategist at Weeden & Co.
Investors were unnerved as perennial market favorite eBay Inc. (EBAY) missed its earnings target for the fourth quarter, and the online auctioneer's outlook for the current quarter was lower than expected, leading three brokerage firms to lower their ratings on the stock. Cell phone maker Qualcomm Inc. (QCOM) likewise issued a disappointing profit forecast.
In economic news, the Conference Board (search) 's Index of Leading Economic Indicators rose 0.2 percent in December, with November's rise revised to 0.3 percent. The index is designed to measure future economic activity.
A survey by the Federal Reserve Bank of Philadelphia (search), which showed a slowdown in growth at U.S. Mid-Atlantic factories, also caused some concern.
"I think you've got all these things that have snowballed and are prompting people to pull chips off the table," said Scott Wren, equity strategist for A.G. Edwards & Sons. "We have a nice, modest, sustainable kind of economic environment that stocks perform pretty well in, but we have to get past some of these things first."
The pressure from tech shares took momentum from Citigroup's (C) strong earnings, and investors also looked past reports of a merger between Federated Department Stores Inc. (FD) and May Department Stores Co. (MAY).
In economic news, U.S. December leading indicators rose 0.2 percent, a report showed, compared with a Reuters survey of U.S. economists that forecast an increase of 0.1 percent.
Oil prices slid after a bigger-than-expected rise in U.S. fuel inventories soothed worries of a winter squeeze.
U.S. oil futures slumped 64 cents to $46.91 a barrel, taking this week's losses to around $1.80. The market had hit a seven-week high of $49.50 on Tuesday. Rising oil prices raises concerns that higher energy costs will pinch corporate profits and curb consumer spending.
Traders monitored the progress of President Bush's inauguration, which passed without incident. Security was extremely tight, as it was the first inauguration since the Sept. 11 attacks in 2001. Investors were also looking ahead to the election in Iraq on Jan. 30.
"We've got the inauguration today and the Iraqi elections in a week -- that's the background noise that's rattling around and maybe a convenient excuse for people to do more active selling," said Caldwell.
The talks between Federated and May, reported Thursday The Wall Street Journal, signals another major consolidation in the retail sector, which is struggling to overcome the dominance of Wal-Mart Stores Inc. The proposed merger would combine Federated's Macy's and Bloomingdale stores with May's Lord & Taylor, Filene's and Marshall Field's.
EBay (EBAY) tumbled $19.72, or 19.14 percent, to $83.33 after missing Wall Street profit forecasts by a penny per share. The company drew immediate criticism from analysts after posting a 2005 outlook that, while still very solid, was less than expected.
Qualcomm (QCOM) posted a 46 percent rise in first quarter earnings, thanks to upgraded wireless networks, and surpassed Wall Street profit forecasts by a penny per share. But investors were disappointed with a conservative 2005 outlook. Qualcomm skidded $3.29, or 8.01 percent, to $37.78.
Citigroup (C) dropped 27 cents to $47.77 after reporting record quarterly earnings that were in line with Wall Street expectations. The financial giant and Dow component also announced a 10 percent increase in its quarterly dividend.
Ford Motor Co. (F) swung to a profit in the latest quarter, compared to heavy losses a year ago stemming from a major restructuring effort. The automaker beat analysts' expectations by a penny per share. Ford nonetheless lost 47 cents to $13.46.
AT&T Corp. (T) fell 44 cents to $18.07 after seeing its fourth quarter profit surge nearly 84 percent thanks to a one-time tax benefit. The telecommunications giant beat Wall Street profit forecasts by 20 per share, even though it posted a loss for the full year. The company's 2005 outlook was muted, however.
Delta Air Lines Inc. (DAL) reported a $2.2 billion loss for the fourth quarter as the struggling airline works to reduce costs and attract more customers with steep fare cuts. High fuel prices added to the losses, which were still 37 cents-per-share steeper than analysts had expected. Delta was down 58 cents, or 9.57 percent, at $5.37.
Warren West, president of Greentree Brokerage Services, noted some increased volatility in the Nasdaq ahead of Friday's expiration of January options -- when single stock futures, individual equity options and some stock index options for the month expire.
Typically, options expiration is orderly but some volatility may occur as players unwind those positions at the last minute against other derivative products.
Trading was heavy, with 1.69 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 2.2 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.
Decliners outnumbered advancers by about 2 to 1 and by about 7 to 3 on Nasdaq.
The Russell 2000 index of smaller companies was down 5.57, or 0.9 percent, at 612.34.
Overseas, Japan's Nikkei stock average fell 1.06 percent. In Europe, Britain's FTSE 100 closed down 0.36 percent, France's CAC-40 lost 0.69 percent for the session, and Germany's DAX index dropped 0.59 percent.
Reuters and the Associated Press contributed to this report.