NEW YORK – Stocks fell on Wednesday, with the Nasdaq posting its sharpest drop in seven weeks, as investors dumped technology stocks on signs wage inflation may force the Fed to again lift interest rates.
The Dow Jones industrial average was down 63.08 points, or 0.55 percent, at 11,406.20. The Standard & Poor's 500 Index was down 12.99 points, or 0.99 percent, at 1,300.26. The technology-laced Nasdaq Composite Index was down 37.86 points, or 1.72 percent, at 2,167.84.
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A third straight session of declines in crude oil futures hurt heavily-weighted energy shares on both the S&P 500 and Dow Jones stock indexes.
Further weighing on tech shares was Intel Corp. (INTC) The chip maker said it will cut 10,500 workers or 10 percent of its work force by the middle of next year, sending its shares lower. The lay-offs were at the low end of the 9,000 to 15,000 job cuts analysts had expected.
"The drop in Intel is very specific and not necessarily a sign the entire tech sector is in bad shape, but Intel, being a bellwether, is dragging other stocks in the group," said Greg Palmer, head of equity trading at Pacific Crest Securities in Portland, Oregon.
Intel, a Dow component, slid 3.4 percent to $19.31. Other semiconductor shares also traded lower on Nasdaq. Xilinx Inc. (XLNX) fell 4.8 percent to $21.15 and Nvidia Corp. (NVDA) shed 5 percent to $27.07. The Philadelphia Stock Exchange index of semiconductors declined 3.3 percent.
The Labor Department said U.S. unit labor costs rose 4.9 percent in the second quarter, well above economists' median forecast. New signs of wage inflation may compel the Federal Reserve to resume its campaign of interest rate hikes.
Shares edged slightly lower after the Fed reported slowing growth in residential construction and rising energy costs in its Beige Book summary of U.S. economic conditions. The economy grew overall from mid-July to late August, but five of the 12 Fed districts reported slowing growth.
The Beige Book "reinforces the Fed's view of a slowing economy, but in conjunction with higher unit labor costs, it makes the economy look a little more stagflationary," said Brian Gendreau, investment strategist at ING Investment Management in New York.
Energy shares were among the top decliners on the S&P after crude oil futures fell by nearly $1 a barrel, the third straight daily decline.
Oil field services company Schlumberger Ltd. (SLB) dropped 5.4 percent to $58.91, while oil producer Occidental Petroleum Corp. (OXY) shed 6 percent to $47.78. Exxon Mobil Corp. (XOM) shares were the top drag on the Dow and S&P 500, declining 1.9 percent to $67.18.
Rising shares of automakers kept indexes from making bigger losses as Ford Motor Co. (F) and General Motors (GM) both rose on separate announcements.
Ford stock gained 1.9 to $8.55 on the NYSE after it named former Boeing Co. (BA) executive Alan Mulally president and chief executive officer to lead its rebuilding effort.
GM shares rose 2.4 percent to $31.17 after announcing extended warranties on 2007 models, including those already sold.
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