NEW YORK (AP) — Disappointing results at Microsoft Corp. and increasing concerns about the nation’s banks sent Wall Street sharply lower Thursday, extending a new streak of stock volatility into a third day. The Dow Jones industrials fell more than 250 points.
Microsoft surprised investors by reporting its fiscal second-quarter earnings early — and the news was not good. The software giant posted an 11 percent drop in profits and said it will slash 5,000 jobs over the next 18 months.
The company said deteriorating global economic conditions and lower revenue from PC software forced it to cut back. The company also said it is unable to provide any profit and revenue guidance for the rest of the year due to market volatility.
Uneasiness about the stability of the financial sector continued to plague investors Thursday, and bank stocks took another beating. Quarterly financial reports showing steep profit declines and big loan losses have investors worried that the financial crisis is far from over, and that the government’s efforts to prop up banks might not be enough to prevent a major failure.
Meanwhile, media reports Thursday said former Merrill Lynch & Co. Chief Executive John Thain has resigned from Bank of America Corp. CNBC and The Wall Street Journal’s Web site are reporting that Thain resigned after a meeting of Bank of America executives Thursday morning. The reports followed news that Merrill had moved up its year-end bonuses, doling out cash just days before it was officially acquired by Bank of America on Jan. 1.
Bank of America has increasingly been criticized in recent weeks for its acquisition of Merrill Lynch, which reported a $15.45 billion fourth-quarter loss last week.
Bank of America was the biggest loser among troubled financial stocks Thursday and extended its losses after the Thain announcement.
More downbeat economic readings, including an increase in the number of weekly jobless benefit claims and a sharp drop in home construction activity, added to the day’s gloom.
In midday trading, the Dow fell 261.65, or 3.18 percent, to 7,966.45. All 30 stocks that make up the Dow fell.
Broader market indexes also slumped. The Standard & Poor’s 500 index fell 27.18, or 3.23 percent, to 813.06, while the technology-heavy Nasdaq composite index dropped 60.49, or 4.01 percent, to 1,446.58.
The Russell 2000 index of smaller companies fell 20.28, or 4.44 percent, to 436.48.
Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange where volume came to 556.8 million shares.
Bond prices were mixed Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.62 percent from 2.55 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.11 percent from 0.12 percent late Wednesday.
The dollar rose against other major currencies, while gold prices rose.
Elsewhere, oil prices fell $2.22 to $41.33 a barrel on the New York Mercantile Exchange.
Thursday’s news follows a wild two days in the markets. The Dow jumped 3.5 percent Wednesday amid a rally in the battered banking industry, stronger-than-expected results from IBM Corp. and hopes of swift action in Washington to help the economy. Those gains came just a day after the Dow tumbled 4 percent on worries governments would further intervene to help struggling banks.
Roy Williams, chief executive of Prestige Wealth Management Group, said volatility is likely to endure for some time.
“I think we’re going to be bouncing between 7,500 and 9,000 (on the Dow) for the next couple of quarters,” he said.
While Microsoft showed weakness, computer and electronic gadget maker Apple Inc. reported fiscal first-quarter profit and revenue that bested analysts’ projections.
Microsoft dropped $2.03, or 10 percent, to $17.35, while Apple gained $4.97, or 6 percent, to $87.80.
Two more technology and Internet heavyweights are set to release quarterly results after the market closes Thursday; Google Inc. and Advanced Micro Devices Inc.
Among the day’s economic reports, the Labor Department said the number of first-time jobless benefit claims jumped to a seasonally adjusted 589,000 in the week ended Jan. 17 from a revised 527,000 the previous week. Economists polled by Thomson Reuters, on average, forecast claims would increase to 540,000.
“Unemployment numbers are bad, and might get a little worse,” Williams said. “Everyone is in a defensive mode right now.”
Meanwhile, new data from the Commerce Department showed the housing market continued to weaken in December. Construction of new homes and apartments plunged to an all-time low annual rate of 550,000 units last month.
The biggest decliners among financial stocks Thursday included Bank of America, which tumbled $1.02, or 15 percent, to $5.66, and Citigroup Inc., which dove 61 cents, or 16 percent, to $3.06.