Stocks fall again, but losses are modest

After a volatile day of trading, bears finally succeeded at pushing the stock market lower.

The Dow Jones industrials closed 35 points lower at 12,466, as a big gain for banking giant JPMorgan Chase (JPM, news, msgs) offset a 12% loss for chip giant Intel (INTC, news, msgs). The Standard & Poor's 500 Index and the Nasdaq Composite Index were lower, too.

The finish was a disappointment because the Dow had been up as much as 112 points at 3 p.m. ET. One reason for the move higher was the Federal Reserve's Beige Book report for January that showed a slowing economy but not a recession.

But sellers came out in force in the last half-hour of trading, pushing energy, metals and tech shares lower.

Apple (AAPL, news, msgs), for example, had rebounded from a bottom of $156.70 in the morning to $165.40 by 2:40 p.m. ET. Then, the stock dropped nearly $6 to $159.64, down 5.6% from Tuesday and down 19% on the month.

If you want some good news from today's market, you'll find it in the relatively modest declines for the Dow, S&P 500 and Nasdaq. In addition to the Dow's 35-point loss, the Nasdaq fell 23 points, 1%, to 2,395. And the S&P 500 finished with an 8-point loss, or 0.6%, to 1,373.

The Dow's loss is noteworthy. The blue-chip index has fallen in six of 11 trading sessions this month. All of those losses -- except today's -- had been 200 points or more, including 277 points on Tuesday.

In addition, the three major indexes seem to be hovering around major support levels -- 12,500 for the Dow, 1,380 for the S&P 500 and 2,400 for the Nasdaq.

If a bottom has been reached or is even near, it will take several days to solidify. It will require some big rallies -- perhaps 200 or 300 points for the Dow. One catalyst could come Thursday when brokerage giant Merrill Lynch (MER, news, msgs) reports fourth-quarter earnings. If the earnings are anywhere near what Wall Street expects -- a loss of $4.57 a share -- and a sense that the brokerage has taken control of its problems with mortgage-related securities, you could see the market pop.

A second and bigger catalyst would be if the Fed cuts its key interest rates by at least a half percentage point. Many investors have been hoping the cuts would come this week instead of the Fed's Jan. 29-30 meeting.

Fed Chairman Ben Bernanke is to testify before Congress on Thursday morning.

A third catalyst would be good-sized economic stimulus program to mitigate the effects of an economy that's clearly slowing and may be falling into a recession. Momentum for such a program is building.

The New York Times reported late today that Bernanke has told members of Congress that he can support tax cuts or spending measures to stimulate the economy, even if they temporarily increase the budget deficit. His big caveat: The measures must be quick and temporary.

A divided market

Basically, today's was a split market. But it was hardly a horrible market.

Fourteen of the 30 Dow stocks finished higher, along with 275 S&P 500 stocks and 70 Nasdaq-100 stocks ($NDX.X).

JPMorgan was the Dow's biggest gainer today, up nearly 5.8% to $41.43. It was 15th-best among S&P 500 stocks. Why? Because JPMorgan isn’t Citigroup (C, news, msgs), which reported an enormous loss on Tuesday yet couldn't convince Wall Street that the worst of its problems are over.

JPMorgan reported that its quarterly profit dropped, but it doesn't seem to have the subprime-mortgage problems that have bedeviled Citigroup.

Intel, meanwhile, finished at $19.88 after its earnings report after Tuesday's close disappointed investors.

The drop in Intel's share price pulled 22 points away from the Dow. Another drag: ExxonMobil (XOM, news, msgs), down 2.5% to $86.53, a reaction to falling oil prices. Exxon's decline knocked 20 points off the Dow.

Mattel (MAT, news, msgs) was the S&P 500 leader, up 8% to $17.99 on an analyst upgrade.

Crude oil closed down 1.2% to $90.84 a barrel in New York this afternoon. Several times today, it fell under $90. Gold was also down nearly $21 an ounce to $882 in New York.

While financial stocks led the market today, energy and metals stocks were hit hard. The Amex Oil Index ($XOI.X) was down 3% to 1,382 as Chevron (CVX, news, msgs) fell 2.3% to $86.25. The Morgan Stanley Commodity Related Equity Index ($CRX.X) fell 3.2%; Freeport-McMoRan Copper & Gold (FCX, news, msgs) fell 6.6% to $88.63. And the Amex Gold BUGS Index ($HUI.X) dropped 4.5%. Barrick Gold (ABX, news, msgs) fell 6% to $47.31.

With today's close, the Dow is down 6% on the year and 12% from its high on Oct. 9. The S&P 500 is down 6.5%; its loss from its Oct. 9 peak is now 12.3%. The Nasdaq is off 9.7% and 16.3% from its six-year high on Oct. 31.

Investors define a correction as a drop of 10%, while a bear market is defined as a 20% drop.

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$90.84	$91.90	-$1.06	-5.36%	-5.36%
Heating oil (per gallon)	$2.5184	$2.5472	-$0.0288	-4.94%	-4.94%
Natural gas (per million BTU)	$8.1330	$8.1960	-$0.0630	8.69%	8.69%
Unleaded gasoline (per gallon)	$2.2783	$2.3092	-$0.0309	-8.53%	-8.53%

Why Intel tumbled

Intel reported fourth-quarter net income of $2.27 billion, or 38 cents per share, a 51% jump from $1.5 billion, or 26 cents per share, Intel earned in the same quarter a year ago.

Analysts had expected Intel to earn 40 cents per share.

Revenue rose 10% to $10.71 billion but also missed Wall Street's estimate of $10.84 billion.

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

The tech bellwether blamed more competitive pricing in the market for NAND flash-memory chips -- those used in cell phones and digital cameras -- for its problems.

Chief Financial Officer Stacy Smith also said the company is "a little bit cautious" on the U.S. economy, adding that first-quarter revenue would be $9.4 billion, also below the consensus estimate of $10.1 billion.

• Video: More on the Intel earnings disappointment

"It's the outlook that Intel provided that is of concern," Crawford Del Prete, analyst at International Data, told MarketWatch.com. "Revenue growth for the fourth quarter was pretty much in line with expectations, but given the skittishness that everyone has on future demand, the fact they gave an outlook in the $9.4 billion to $10 billion range was a disappointment."

JPMorgan's good 'bad' news

The news wasn't awful for JPMorgan Chase, and that was good enough for Wall Street. Indeed, JPMorgan led financial stocks higher. The financial sector was the top performer among the 10 sectors of the S&P 500 with a 1.3% gain.

JPMorgan reported net income of $2.97 billion, or 86 cents per share, down 34% from $4.53 billion, or $1.26 per share, a year ago. Analysts had expected earnings of 93 cents a share.

Revenue, however, rose 7% to $17.4 billion, slightly beating analysts' estimates of $17.2 billion.

• Check the Top Stocks blog

JPMorgan said it wrote down $1.3 billion on bad subprime-mortgage bets. And it conceded slower activity in its credit card business.

The company said it was looking at 2008 very cautiously.

Meanwhile, Wells Fargo (WFC, news, msgs) also reported a profit drop in the fourth quarter.

The banking company -- the nation's second-biggest mortgage lender, behind troubled Countrywide Financial (CFC, news, msgs) -- said today that net income fell to $1.36 billion, or 41 cents per share, down 38% from $2.18 billion, or 64 cents a share, a year ago.

Revenue rose 8% to $10.2 billion. Wall Street had been expecting earnings of 41 cents per share on $10.1 billion in revenue for the quarter.

The bank said it had set aside $1.4 billion to cover loan losses from home-equity loans.

Wells Fargo shares rose 3.3% to $27.37.

"Except for the admitted slip of getting involved in third-party home-equity loans, they've done a fine job in a challenging market in avoiding credit missteps," Thomas Russo, money manager at Gardner, Russo & Gardner, told Reuters.

But CEO John Stumpf echoed worries from JPMorgan's Jamie Dimon about 2008. "We expect the environment to remain challenging in 2008, particularly in the consumer sector," Stumpf said in a press release.

Separately, Bear Stearns upgraded the U.S. financial sector to "market weight" from "market underweight" this morning, also giving many of the stocks some strength.

Consumer prices rise

The Consumer Price Index rose 0.3% in December, slightly above economists' estimate of a 0.2% increase, the Labor Department reported this morning.

The core CPI, which excludes food and energy prices, rose 0.2% last month, in line with estimates.

• Video: Greenspan's next job

For all of 2007, the CPI rose 4.1%, the biggest increase in 18 years; the core CPI rose 2.4% last year.

The high CPI growth might worry the bankers at the Federal Reserve bank -- but things are changing, one economist said. "With the sluggish growth outlook and rising risk of recession, inflation concerns have receded," Lehman Bros. analyst Zach Pandl told Bloomberg News. "The Fed is clearly focusing on growth at this point."

The Fed is expected to cut its key interest rate by at least a quarter percentage point at the Federal Open Market Committee meeting at the end of this month.

Continued: Oracle wins BEA Systems finally

 1 | 2 | next >