Street loves Intel, Yahoo earnings

Stocks fell for a second day in a row thanks to worries about banking profits, fears the housing bust will last longer than anyone expected and a sharp increase in the price of crude oil.

After the close, chip giant Intel (INTC, news, msgs) and Internet search engine Yahoo (YHOO, news, msgs) brought a lot of cheer with better-than-expected third-quarter earnings. Those reports may give stocks a boost on Wednesday.

IBM Corp. (IBM, news, msgs), however, saw its shares slip after the company met Wall Street expectations.

Crude oil hit $88.20 a barrel in New York in the morning and fell back to a close of $87.61. But that was a new closing high.

Traders remain concerned that Turkey may attack northern Iraq to limit attacks on its territory from Kurdish separatists. But heavy global demand is helping push crude prices higher. And some analysts believe $90 crude is a likely possibility.

• Talk back: Where were you on  Black Monday 20 years ago when the stock market crashed?

Meanwhile, the Dow Jones industrials finished down nearly 72 points to just under 13,913, weighed down by worries about the duration of the housing slump, and weakness in key banking stocks such as Wells Fargo (WFC, news, msgs), down 4% to $34.51. The Dow's finish, however, was an improvement from 3:05 p.m., when it was down 102 points. The blue-chip index had fallen 108 points on Monday.

The Standard & Poor's 500 Index was off 10 points to just under 1,539. The Nasdaq Composite Index fell slipped about 16 points to 2,764.

Energy and semiconductor stocks were among the few winners today. Chevron (CVX, news, msgs) rose 1.2% to $93.45. Anadarko Petroleum (APC, news, msgs) jumped 2.2% to $58.71.

Intel, Yahoo beat Street

After the close, Intel and Yahoo shares were moving higher on the strength of surprisingly good earnings reports.

Intel shares were up 5.5% to $26.89 after falling 1% in regular trading.

The company earned 31 cents a share in the quarter on revenue of $10.1 billion. The earnings per share were up 41% from a year ago and beat Wall Street estimates of 30 cents a share.

Revenue was up 15% and way ahead of the consensus estimate of $9.6 billion.

The company's gross profit margin, a key measure of profitability, was 52.4%, up from 46.9% in the second quarter.

For the fourth quarter, Intel predicts revenue of $10.5 billion to $11 billion and a gross margin of 57%. Intel expects margins to be 52% for the year.

Yahoo shares were up more than 8.8% to $29.05.

The company said it earned 11 cents a share in the quarter, unchanged from a year ago but up 3 cents from the Street estimate of 8 cents a share. The shares had been down 4.2% in regular trading.

Revenue, once payments to partners are backed out, was $1.28 billion, up 14% from a year ago and ahead of the Wall Street estimate of $1.24 billion.

The company projected that fourth-quarter revenue would come in at $1.3 billion to $1.45 billion, compared with the consensus estimate of $1.37 billion.

IBM shares were down 1.2% in after-hours trading to $118.22. Traders seemed disappointed that Big Blue did not produce a surprise.

Not that IBM reported bad numbers. The company had reported its tenth-straight quarter of improved earnings.

The company earned $1.68 a share, in line with estimates and up 16% from a year ago's $1.45 a share. Revenue was up 6.6% to $24.1 billion from a year ago. Revenue was in line with estimates.

The stock was up 1.3% in regular trading to $119.60.

Judging from after-hours trading, Intel's report especially should help techs stocks on Wednesday.

Microsoft (MSFT, news, msgs) shares, up nearly 1% to $30.32 in regular trading, moved up an additional 1% in after-hours trading to $30.67. (Microsoft is the publisher of MSN Money.)

Apple (AAPL, news, msgs) was up 1.1% in after-hours trade to $171.50. Dell Inc. (DELL, news, msgs) jumped nearly 2% to $28.39, and SanDisk (SNDK, news, msgs) added 1.6% to $47.75.

Yahoo archrival Google (GOOG, news, msgs) was up 1.7% to $625.15 in after-hours trading.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$87.61	$86.13	$1.48	7.29%	43.51%
Heating oil (per gallon)	$2.3387	$2.3072	$0.0315	4.50%	46.36%
Natural gas (per million BTU)	$7.3670	$7.4450	-$0.0780	7.23%	16.96%
Unleaded gasoline (per gallon)	$2.1737	$2.1575	$0.0162	5.10%	35.68%

Housing will weaken the economy

The big problem the markets faced all day was housing, as the Bush administration and Federal Reserve Chairman Ben Bernanke both conceded the housing bust will be a drag on the economy for at least a year.

The National Association of Home Builders reported that builder confidence continues to sink as builders struggle with rising cancellations and a glut of homes for sale in key markets such as Florida, Arizona and California.

Treasury Secretary Hank Paulson was surprisingly blunt today about the housing bust.

"The ongoing housing correction is not ending as quickly as it might have appeared late last year," Paulson said in a speech at the Georgetown University Law Center. "And it now looks like it will continue to adversely impact our economy, our capital markets, and many homeowners for some time yet."

Housing prices have flattened or fallen in many parts of the country, as homeowners with adjustable-rate mortgages have found it increasingly hard to make their monthly payments. The market's problems have impacted everyone from low-income homeowners to huge Wall Street banks.

Complicating the problem, he said, is a regulatory structure of home lending that's fragmented at best and leaves borrowers vulnerable to lender abuses. He said the administration would support new legislation to fix the problem.

In the meantime, he called on Congress, lenders and Wall Street to look for ways to refinance adjustable-rate mortgages before they reset to much higher rates and make the situation worse.

Fed Chairman Bernanke, meanwhile, told the New York Economic Club that the housing market will continue to be a drain on the economy through next year. Bernanke also said that although "conditions in financial markets have shown some improvement" since August, "a full recovery of market functioning is likely to take time."

• Video: More on Bernanke's speech

Bernanke told his listeners that the Fed would act appropriately and as needed. But he added that it is "too early to assess the extent to which household and business spending will be affected by the weakness in housing and the tightening in credit conditions."

The Fed reduced the federal funds rate by 50 basis points to 4.75% at its last meeting, in September, spurring a huge rally in the stock markets. Bernanke’s speech suggested more cuts are ahead.

• Fannie Mae and Freddie Mac officials don't see an upturn until 2009

All the fretting about housing hit housing starts hard. The Philadelphia Housing Sector Index ($HGX) was down nearly 3% to 158.32. D.R. Horton (DHI, news, msgs) fell 5.3% to $12.86. Pulte Homes (PHM, news, msgs) fell 2% to $14.15, and Lennar (LEN, news, msgs) was off 2.8% to $22.97.

A possible Chinese stake in Bear Stearns

China could be taking a bite out of Bear Stearns (BSC, news, msgs).

China Citic Group, a state-owned investment company, said it is bidding for a stake of the U.S. bank. China Banking Regulatory Commission Vice Chairman Jiang Dingzhi made the announcement during a meeting at the Communist Party Congress.

He did not give details about the size of the stake or how much Citic would pay. A Bear Stearns spokeswoman was not immediately available for comment.

"At the moment, Bear Stearns is a bargain," Arthur Lau, money manager at JF Asset Management in Hong Kong, told Bloomberg News. "For China, it's important to have a platform to learn what investment banking is."

• Video: Is China in a bubble?

Bear Stearns has been rumored to be seeking a partner after the investment bank was slammed by the mortgage troubles this summer and the bank reported a 61% drop in profit for the third quarter.

Warren Buffett was named as a potential partner, but Dick Bove, analyst at Punk, Ziegel, dismissed that idea. "It would be most effective for (Bear) if a financial institution from Europe or Asia took a stake in Bear," Bove told MSN Money last month.

Shares of Bear jumped 2% to $123.05.

• Get free, real-time stock quotes on MSN Money

Wells Fargo hit on mortgage write-downs

Wells Fargo shares were hit hard even though it appeared it had weathered the mortgage and credit summer storm.

The bank said its net income actually rose 4.1% in the third quarter; that's a change from what Wall Street has been hearing from many other banks and financial institutions, although it still fell short of analysts' expectations.

Wells Fargo said it earned $2.28 billion, or 68 cents a share, up from $2.19 billion, or 64 cents a share, in the same quarter last year. Half the profit came from a gain from hedging its loan portfolio. Analysts were expecting 70 cents a share.

• Video: Shaking things up at Merrill, Citi

Wells Fargo took $490 million in write-downs on bad mortgages and boosted its reserves for loan losses by 46% in the quarter.

Wells Fargo was not alone in having housing hurt the bottom line.

US Bancorp (USB, news, msgs) and KeyCorp (KEY, news, msgs) both reported profit declines, blaming the declines not on mortgages but on construction lending issues. KeyCorp. shares fell 5.9% to $30.44; U.S. Bancorp fell 0.5% to 32.55.

The Standard & Poor's Banking Index ($BIX.X) fell 2.7% to 350 and was the second-weakest index of 41 tracked by Market Dispatches -- after the Philadelphia Housing Sector Index. The banking index fell nearly 25% in the third quarter and is basically flat this quarter.

Ericsson slashes forecast

Swedish wireless-network maker Ericsson (ERIC, news, msgs) warned this morning that operating profit would fall 36% in the third quarter, sending its shares plunging 23% to $31.33.

"The unexpected development in the quarter is mainly due to a shortfall in sales in mobile-network upgrades and expansions, which resulted in an unfavorable business mix that also negatively affected group margins," CEO Carl-Henric Svanberg said in a press release.

The news pushed other companies in the sector lower: Alcatel-Lucent (ALU, news, msgs) shares fell 4.5% to $9.30, and Nokia (NOK, news, msgs) shares were down 3.1% to $35.31.

JNJ profit falls

Dow component and drug giant Johnson & Johnson (JNJ, news, msgs) reported a 13% decline in third-quarter profit today.

The company said it earned $2.55 billion, or 88 cents a share, down from $2.76 billion, or 94 cents a share, in the same period a year ago.

Excluding charges, J&J earned $1.06 a share, ahead of Wall Street's consensus estimate of 99 cents per share.

• Video: Greenspan on the economy

Revenue also beat The Street's estimate: Sales for the quarter rose nearly 13% to $14.97 billion, ahead of analysts' estimate of $14.85 billion.

Johnson & Johnson boosted its full-year forecast to between $4.10 and $4.13 a share, up from an earlier forecast of between $4.02 and $4.07 a share.

Shares of the stock were down 0.9% to $65.07.

Short hits from the markets -- 4 p.m. ET

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	4.125%	4.160%	-0.035	11.49%	-15.56%
5-year Treasury note yield	4.342%	4.390%	-0.048	2.67%	-7.64%
10-year Treasury note yield	4.655%	4.673%	-0.018	1.66%	-1.17%
30-year Treasury bond yield	4.912%	4.907%	0.005	1.63%	1.95%
Currencies
U.S. Dollar Index	78.19	78.03	0.16	0.73%	-6.48%
British pound in dollars	$2.0333	$2.0425	-0.0091	-0.69%	3.76%
Dollar in British pounds	£0.4918	£0.4896	0.0022	0.70%	-3.63%
Euro in dollars	1.4170	1.4219	-0.0048	-0.68%	7.35%
Dollar in euros	€ 0.7057	€ 0.7033	0.0024	0.68%	-6.85%
Dollar in yen	¥116.68	¥117.41	-0.73	1.68%	-1.97%
Commodities
Gold	$762.00	$762.20	-$0.20	1.60%	19.44%
Copper	$3.6410	$3.6860	-$0.045	0.03%	26.82%
Silver	$13.6580	$13.8550	-$0.20	-1.88%	7.11%
Crude oil (NYMEX) (per barrel)	$87.61	$86.13	$1.48	7.29%	43.51%

Ex-CEO could bid for Children's Place

There could be a bidder for Children's Place Retail Stores (PLCE, news, msgs), and it could be the company's former chief executive.

Ezra Dabah, who was ousted as CEO in late September, has hired Bear Stearns as a financial adviser, according to a filing with the Securities and Exchange Commission.

Dabah and his wife together own 17.9% of Children's Place stock, and the two are considering making a bid for the company with the help of a strategic partner or a private-equity firm.

Dabah left the post after an internal investigation found that he failed to follow the company's disclosure rules regarding stock trades.

Shares of Children's Place, which have fallen 14% since the beginning of September, fell 3.8% to $23.80.

By Charley Blaine and Elizabeth Strott