NEW YORK – Profit-taking after the previous session's triple-digit gains sent stocks sliding Tuesday, with technology shares and small-caps hit the hardest on disappointing news from Texas Instruments Inc. and a surprising drop in consumer confidence.
Many investors moved to cash in their gains after the Dow Jones industrials (search) turned in a 169-point performance Monday, a rally fueled by the nomination of Bush administration economist Ben Bernanke (search) to succeed Alan Greenspan as head of the Federal Reserve Board. Others, however, believe Bernanke's nomination could signal an end to the Fed's interest rate increases, which would be a boon for corporate profits.
In early afternoon trading, the Dow fell 26.56, or 0.26 percent, to 10,358.44. Broader stock indicators also moved lower. The Standard & Poor's 500 index (search) dropped 6.26, or 0.52 percent, to 1,193.12, and the Nasdaq composite index (search) lost 14.83, or 0.7 percent, to 2,101.00.
"I think the Bernanke nomination removed a major uncertainty for investors, and I think it signals that the Fed will be closer to ending its rate hikes," said Joe Keating, chief investment officer at First American Asset Management in Birmingham, Ala. "The market's been oversold as well, and earnings are in pretty good shape."
Yet stocks remained under pressure as chip maker Texas Instruments joined an increasing number of major corporations issuing weak fourth-quarter sales forecasts. And the Conference Board reported that its consumer confidence index fell to 85 in October, down from 86.6 in September and less than the 88 reading economists had expected.
Bonds added to Monday's sharp losses, with the yield on the 10-year Treasury note rising 4.48 percent from 4.45 percent late Monday. The dollar was lower against most major currencies, while gold prices rose.
Oil prices rebounded substantially after losing ground in the previous trading session. A barrel of light crude was quoted at $61.75, up $1.43, on the New York Mercantile Exchange.
In other economic news, existing home sales for September, reported by the National Association of Realtors (search), were steady at an annualized rate of 7.28 million homes, slightly higher than expected. However, the increase was due to higher demand for new homes among refugees from Hurricane Katrina; without that demand, sales would have fallen.
While third-quarter earnings from Texas Instruments (TXN) rose 12 percent from the year-ago quarter, the company's revenue forecasts for the fourth quarter were weaker than expected. That led Bear Stearns analysts to downgrade the company's stock. Texas Instruments dropped $2.30, or 7.4 percent, to $28.62.
DuPont Co. (DD) gained $1.37 to $40.99 after one-time charges related to hurricane damage and taxes. Without those charges, the company's earnings beat Wall Street forecasts by 3 cents per share. The chemical maker also announced a $5 billion stock buyback program.
Earnings at International Paper Co. (IP) rose sharply in the third quarter on proceeds from the sale of an Australian forest products company and a tax settlement. Despite materials and energy costs, the company surpassed analysts' earnings expectations by 9 cents per share. International Paper nonetheless lost 20 cents to $28.17.
Cablevision Systems Corp. (CVC) tumbled $3.45, or 12 percent, to $24.35 after the Dolan family, the company's majority shareholders, withdrew a plan to take the cable operator private. The family has recommended that Cablevision's board issue a $3 billion special dividend to shareholders instead.
Declining issues outnumbered advancers by more than 5 to 3 on the New York Stock Exchange, where volume came to 874.44 million shares, compared with 863.92 million traded at the same point on Monday.
The Russell 2000 index of smaller companies fell 8.53, or 1.32 percent, to 638.07.
Overseas, Japan's Nikkei stock average surged 1.33 percent. In Europe, Britain's FTSE 100 closed down 0.49 percent, France's CAC-40 lost 0.56 percent for the session, and Germany's DAX index dropped 0.59 percent in late trading.