NEW YORK – Disappointing tech sector earnings set off a second day of selling on Wall Street Wednesday, though the markets showed strength in the face of a major selloff in Japan. The tech-dominated Nasdaq composite bore the brunt of investors' concerns.
The Nasdaq composite index fell 23.05, or 1 percent, to 2,279.64. The other major stock indicators also fell, though not as much. The Dow Jones industrial average dropped 41.46, or 0.38 percent, to 10,854.86, and the Standard & Poor's 500 index lost 5.00, or 0.39 percent, to 1,277.93.
While Japan's Nikkei 225 lost 2.94 percent for the session overnight, prompting the Tokyo stock market to close early due to heavy volume, Wall Street remained focused on earnings from Intel Corp. and Yahoo Inc. (YHOO), anxious that shortcomings there foretold disappointing earnings at other major companies.
Yet despite the tech sector's losses, other stocks generally held firm, resisting a broader selloff after the Labor Department reported better-than-expected retail inflation data.
"The selling you're seeing is nearly all on the tech side, and you're seeing resilience in other parts of the market," said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. "This tells me that people aren't panicking over Japan or anything else."
Bonds edged lower, with the yield on the 10-year Treasury note rising to 4.34 percent from 4.33 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices dropped.
Crude oil futures fell below $66 per barrel as traders took profits after the recent surge in energy prices, prompted by escalating tensions in the Middle East. A barrel of light crude settled at $65.73, down 58 cents, on the New York Mercantile Exchange.
The government's inflation data helped keep Wall Street's losses confined to the tech sector. The consumer price index, which measures the price of retail goods and services, fell 0.1 percent, better than the 0.2 percent rise expected on Wall Street. So-called "core" CPI, with food and fuel prices removed, rose 0.2 percent, in line with economists' forecasts.
Yet investors remained concerned that the disappointments in the tech sector could foreshadow lower-than-expected earnings across the board. With the runup in stocks since the beginning of the year, investors may be skittish about holding on to those gains, and could sell off heavily if earnings continue to fall below expectations.
"The consensus is looking for 13 percent earnings growth in Q4, which is a pretty high hurdle," said Brian Gendreau, investment strategist for ING Investment Management. "Earnings have been coming in better than expected for a long time. This time, if earnings don't come in better than expected, the market may take a hit."
Dow component Intel posted a 16 percent jump in fourth-quarter profits, but missed Wall Street's earnings forecasts by 3 cents per share. The chip maker blamed soft computer demand for the shortfall. Intel, considered a barometer for the rest of the tech sector, tumbled $2.92, or 11 percent, to $22.60.
Yahoo dropped $4.93, or 12 percent, to $35.18 after it also missed analysts' profit expectations despite doubling its fourth-quarter earnings from a year ago. It was the second consecutive quarter that Yahoo missed Wall Street's forecasts, prompting worries that the Internet company was losing ground to rival Google Inc. (GOOG).
Another tech heavyweight, IBM Corp. (IBM), handily beat Wall Street profit forecasts by 17 cents per share in the fourth quarter despite slower growth in its core services business. While the Dow industrial issued a somewhat cautious forecast for 2006, IBM shares rose 80 cents to $83.80.
In the financial sector, JPMorgan Chase & Co. (JPM) fell 43 cents to $39.28 after its fourth-quarter revenues fell below analysts' forecasts. The financial company's profit climbed 60 percent from a year ago, but increased personal bankruptcies hurt the company's credit and lending businesses.
Declining issues outnumbered advancers by about 6 to 5 on the New York Stock Exchange, where preliminary consolidated volume came to 2.34 billion shares, compared with 2.23 billion traded on Tuesday.
The Russell 2000 index of smaller companies rose 0.16, or 0.02 percent, to 703.78.
Overseas, Britain's FTSE 100 was down 0.62 percent, Germany's DAX index lost 1.18 percent, and France's CAC-40 fell 0.73 percent.