NEW YORK (AP) — Bleak outlooks from Time Warner, Intel and Alcoa combined with more evidence of rising unemployment sent stocks sharply lower Wednesday, sending major indexes down more than 2 percent including the Dow Jones industrials, which lost more than 225 points.
Unlike the panicked swings seen last fall, however, the declines were far more oderly, and some retrenchment had been expected following sharp rises in the final days of 2008 and into 2009.
Wall Street has been absorbing poor economic and corporate news far better since last November as some have dared to hope for a recovery in the second half of this year or early 2010, but the latest round of unnerving news proved to be too much to set aside.
Media industry bellwether Time Warner Inc. said Wednesday it would take a $25 billion impairment charge in the fourth quarter for its cable, publishing and AOL units, while Intel Corp. said it now expects fourth-quarter revenue to drop 23 percent, below prior estimates, on a further weakening in demand from computer makers.
Alcoa Inc. had jolted investors late Tuesday with an announcement that it would slash its annual output by more than 18 percent and cut its global work force by 13 percent.
Time Warner sank 72 cents, or 6.6 percent, to $10.26, while Intel dropped 66 cents, or 4.3 percent, to $14.71. Alcoa tumbled $1.06, or 8.8 percent, to $11.06.
The market was already worried about what the Labor Department’s report on employment would bring on Friday, and received a disappointing harbinger Wednesday as the ADP National Employment Report said private sector employment fell by a greater-than-expected 693,000 in December. The report is an unofficial gauge that the market has been increasingly monitoring as U.S. job losses mount.
Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the market is simply reacting to the day’s drubbing of bad news, particularly the ADP employment report. “One too many punches and the fighter finally went down,” he said.
The ADP report is making investors question whether any government effort to revive the economy will be sufficient, he said.
“The market has shrugged off some bad news recently, and it’s starting to get to the point where it can’t do that anymore,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York
The Dow has rallied about 20 percent since its multiyear lows in late November 2008, and the Standard & Poor’s 500 index has surged nearly 25 percent. The S&P 500 began Wednesday’s session up 3.5 percent for the first three trading days of 2009.
“We’ve had a big move,” Fullman said. “What we’re looking at now is just people getting a little cautious here.”
In midafternoon trading, the Dow dropped 230.10, or 2.55 percent, to 8,785.00. The Standard & Poor’s 500 index fell 25.15, or 2.69 percent, to 909.55, while the Nasdaq composite index fell 48.37, or 2.93 percent, to 1,604.01.
The Russell 2000 index of smaller companies fell 11.35, or 2.21 percent, to 503.36.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 614.6 million shares.
Bond prices were mixed Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.53 percent from 2.47 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, edged lower to 0.12 percent from 0.14 percent.
The dollar fell against other major currencies. Gold prices also fell.
Crude oil prices dropped $3.36 to $45.22 a barrel on the New York Mercantile Exchange.
Technology stocks were among the biggest decliners after the Intel announcment. Financial shares fell after Oppenheimer & Co. analyst Meredith Whitney warned that banks could have to raise fresh capital in 2009 as they face continued deterioration of their balance sheets. JPMorgan Chase & Co. fell $1.05, or 3.5 percnet, to $28.83, while Citigroup Inc. fell 17 cents, or 2.3 percent, to $7.29.
The market’s economic worries had been calmed a bit in recent days by President-elect Barack Obama’s proposal to slash taxes and help businesses. On Tuesday, Wall Street overcame gloomy economic readings to finish with a moderate advance.
But investors are anxious for more details of the stimulus package, which could cost as much as $775 billion.
On Wednesday, Obama promised to scour the federal budget to eliminate what doesn’t work and improve what does to “put government on the side of taxpayers and everyday Americans.”
As part of the effort to eliminate government waste, the President-elect named Nancy Killefer as his administration’s chief performance officer, a newly created position. Killefer, a director of a management consulting firm, previously served as an assistant secretary of the treasury under President Bill Clinton.