Dow falls 411; Intel cuts outlook

By Charley Blaine and Elizabeth Strott

Stocks fell to their lowest levels since late October today after bad news from Best Buy (BBY, news, msgs) and Macy's (M, news, msgs) and a negative reaction to changes in the government's financial rescue program.

The Dow Jones Industrial Average closed down 410 points, 4.7%, to 8,284. The Standard & Poor's 500 Index was down 47 points, or 5.2%, to 852. The Dow and S&P 500 closes were their worst since Oct. 27.

The Nasdaq Composite Index shed 82 points, 5.2%, to 1,499 -- its lowest close of the year, dropping below the old low of 1,505.90 on Oct. 27.

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Since the presidential election on Nov. 4, the Dow has given up 1,343 points, or 14%. The S&P 500 has dropped 149 points, or 15.3%, and the Nasdaq has lost 272 points, or 15.8%.

The sell-off was broad, although volume was average. It continued to punish some of the high flyers of recent years.

Google (GOOG, news, msgs) tumbled 6.6% to $291 -- its first close below $300 since Oct. 14, 2003. The stock is down nearly 61% in 13 months. Apple (AAPL, news, msgs) fell 4.9% to $90.12 -- just above its low for the year in early October. It's off 55% since its peak close of $199.83 on Dec. 28.

The market is likely to be stressed on Thursday after semiconductor giant and Dow component Intel (INTC, news, msgs) said fourth-quarter results will miss Wall Street estimates. Revenue will be around $9 billion; the company had forecast $10 billion to $10.9 billion in revenue.

The company cited "significantly weaker than expected demand in all geographies and market segments." And it said PC makers are "aggressively reducing component inventories."

Intel was off 7.2% to $12.55 in after-hours trading. The stock had fallen 2.9% to $13.52 in regular trading.

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Software giant Microsoft (MSFT, news, msgs) was down 2.1% to $19.88 after hours. The stock had closed down 4.3% to $20.30 in regular trading, its lowest close since March 2000. (Microsoft is the publisher of MSN Money.)

The announcement affected personal computer makers that use Intel chips in after-hours trading. Dell (DELL, news, msgs) fell nearly 3% to $10.19 after closing at $10.50. Hewlett-Packard (HPQ, news, msgs) fell 2.1% to $30.48 from a regular close of $31.14. Apple fell an additional 2.8% to $87.57, just above its 52-week low of $85.

At the same time, Applied Materials (AMAT, news, msgs) said late today that its fiscal fourth-quarter earnings dropped 45%. The company, which makes chip-manufacturing equipment, will cut 1,800 jobs, or 12%, by the end of fiscal 2009.

Wall Street also will be keyed Thursday on earnings reports due from Wal-Mart Stores (WMT, news, msgs) and Nordstrom (JWN, news, msgs).

Futures trading on Wednesday evening was signaling lower opens for the Dow, S&P 500 and the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks. Stocks were lower in early trading in Japan, Australia and New Zealand.

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$56.16	$59.33	-$3.17	-17.18%	-41.49%
Heating oil (per gallon)	$1.8354	$1.9290	-$0.0936	-8.52%	-30.72%
Natural gas (per million BTU)	$6.4050	$6.7050	-$0.3000	-5.57%	-14.41%
Unleaded gasoline (per gallon)	$1.2481	$1.3059	-$0.0578	-13.40%	-49.89%

Best Buy starts the selling

Best Buy startled Wall Street with the announcement that it was seeing the worst retail climate ever. Macy's chimed in later, saying its fourth-quarter sales would fall 1% to 6%. Stocks of both companies dropped sharply.

Two additional forces drove stocks lower:

• Financial stocks were a mess. Citigroup (C, news, msgs), down 10.7% to $9.64, was the worst performer among the 30 Dow stocks. It was Citigroup's first close below $10 since May 1996. Just ahead of Citigroup in the Dow were American Express (AXP, news, msgs), down 10.5% to $20.05, and Bank of America (BAC, news, msgs), down 9% to $17.

• Lower oil prices. Crude oil closed down 5.3% to $56.16 in large part because of slowing U.S. demand. The Energy Information Administration predicted prices will hold in the lower-$60 range over the next year. The Select Sector SPDR-Energy (XLE, news, msgs) exchange-traded fund was off 8.2% to $44.60, the worst performer of the 10 ETFs that track the components of the S&P 500. Oil services stocks were hard hit on speculation that drilling projects may be being delayed or shelved. Transocean (RIG, news, msgs) was down 9.6% to $67.66. Separately, the International Energy Agency forecast slower growth in energy consumption in future years. But production will fall as well.

Only one of the 30 Dow stocks was higher: General Motors (GM, news, msgs), up 5.5% to $3.08 after House Speaker Nancy Pelosi said she expects to see legislation helping the domestic auto industry survive. The worst Dow performers were financial stocks:

Jujst 11 S&P 500 stocks were higher, along with just five stocks in the Nasdaq-100 Index. The index was down 60 points, or 4.9%, to 1,165.

The Nasdaq was joined by the Nasdaq-100 index in finishing below their Oct. 27 closes, which had been their closing lows on the year. The Dow, S&P 500 and Russell 2000 Index ($RUT.X), which tracks small-cap stocks, remained above their Oct. 27 closes.

None of the major indexes, however, finished below their 2008 intraday lows, which analysts who chart the market regard as key levels to watch. Here's where matters stood with today's close:

How the market stands against its lows

Index	Today	Chg. From 2008 low	2008 intraday low	Date
Dow Jones Industrial Average	8,282.66	5.08%	7,882.51	Oct. 10
Standard & Poor's 500 Index	852.30	1.40%	840.54	Oct. 10
Nasdaq Composite Index	1,499.21	0.36%	1,493.79	Oct. 24
Nasdaq-100 Index	1,165.38	1.41%	1,149.12	Oct. 24
Russell 2000 Index	452.80	2.46%	441.92	Oct. 28

Best Buy lowers outlook

In Best Buy's earnings announcement today, the electronics giant said fiscal 2009 earnings will be between $2.30 and $2.90 per share -- well below a previous forecast of between $3.25 and $3.40 per share, as well as below the consensus estimate for $3.02 per share.

"Seismic changes in consumer behavior have created the most difficult climate we've ever seen. Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year," CEO Brad Anderson said in a statement.

• Top Stocks blog: TV sales slow before holiday push

Best Buy shares slumped 8% to $21.97.

The retailer said it expects same-store sales to decline by 1% in fiscal 2009, with revenue coming in between $43.7 billion and $45.4 billion. Analysts expect revenue of $46.2 billion.

Macy's sees a weak quarter as retail worries grow

Shares of department store chain Macy's (M, news, msgs) tumbled 11.1% to $8.37 after it reported a third-quarter loss and suggested the current quarter will be tough.

The stock is down 66% this year.

Macy's lost $44 million, or 10 cents per share, in the third quarter -- down from a profit of $33 million, or 8 cents per share last year. Excluding charges, Macy's posted an 8-cent loss, better than the expected loss of 19 cents per share.

Third-quarter sales were down 7% to $5.49 billion. Macy's sees a weak fourth quarter, with sales down 1% to 6% from a year ago. If sales trends are like what began in mid-October, the sales decline could be in the bottom end of the range.

Macy's held onto its full-year earnings forecast: The company expects to earn between $1.30 and $1.50 per share. (Analysts' forecast is for earnings of $1.37 for the year.)

But the company said it is cutting its capital spending guidance for 2009, from $1 billion to between $550 million and $600 million.

The government will report on retail sales for October on Friday, and analysts are expecting the worst monthly decline since the recession of 2001.

Changes to $700 billion bailout

Just weeks after President Bush signed the government's $700 billion rescue plan for the financial markets, the plan is changing, Treasury Secretary Hank Paulson said today.

Wall Street wasn't impressed, with the Dow losing 100 points while Paulson spoke.

He said the government will use the remaining $350 billion of the $700 billion in rescue funds to address the dismal consumer situation.

The government is holding off on buying troubled mortgage assets from financial companies, he said. Money that is saved by not buying the risky mortgage securities can be used to help the market for student and auto loans, as well as credit card receivables.

"Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards," Paulson said in a news conference today. "This is creating a heavy burden on the American people and reducing the number of jobs in our economy."

• Read Paulson's comments

The Treasury Department has committed $290 billion of the first $350 billion in rescue funds to help struggling financial institutions and markets. The Treasury also may give some of the bailout funds to financial institutions that aren't banks.

Paulson's remarks were an acknowledgement that the pitch he made to Congress for the bailout hasn't delivered what was promised.

Paulson sold the Troubled Asset Relief Program as a way to rid bank balance sheets of illiquid mortgage assets, and he may encounter resistance from Congress for the remaining $350 billion after using most of the first half to buy bank stakes, said Kevin Petrasic, a former Treasury official and a lawyer in Washington. "I'm not sure how you get around dealing with what is clearly the congressional intent."

Paulson said he has no regrets for the revised plan. "I will never apologize for changing a strategy or an approach if the facts change," he said.

American Express wants government help

American Express shares fell even as it became the latest company to seek government assistance.

American Express is asking for $3.5 billion in aid from the federal government, The Wall Street Journal reported this morning. It was unclear whether the request for help under the Treasury Asset Relief Program came before or after the company officially became a bank holding company late Monday.

AmEx has not announced the request, the paper reported.

So far, a Keefe, Bruyette & Woods report says, 52 financial companies have received some type of approval for approximately $172 billion of the first $250 billion available.

Earlier this week, Circuit City (CC, news, msgs) said it will file for bankruptcy protection.

Wal-Mart Stores (WMT, news, msgs) will post its results Thursday.

"The biggest thing the U.S. economy has going against it right now is a lack of consumer confidence. You can see the writing on the wall. If the American consumer continues to have a pullback in the fourth quarter during the holiday season, everything gets hit," Timothy Speiss, head of accounting firm Eisner's wealth management division, told MarketWatch.com.

Mall operator warns of bankruptcy

Mall operator General Growth Properties (GGP, news, msgs) will be removed from the S&P 500 Index as of the close of trading today, after the company said Tuesday that it may have to file for bankruptcy protection because of the continued slump in consumer spending.

In August, the company said it might sell assets to try to raise capital.

General Growth shares were down an additional 14 cents, or 28.4%, to 35 cents after plunging 64% to 49 cents on Tuesday.

General Growth's problems stem from its $11.3 billion purchase of Rouse in 2004, which was financed almost completely with debt. The move left General Growth highly leveraged, Rich Moore, managing director at RBC Capital Markets, told Bloomberg News: "They took a big gamble, and it did not pay off."

General Growth Properties operates more than 200 malls in 44 states across the country.

"You can keep a mall open with 60% to 70% (store) occupancy," Ivan Friedman, president & CEO of RCS Retail Real Estate Advisors, said to CNNMoney. "But if it falls to below 40%, then the weakest malls could be forced to close."

Biotech company Cephalon (CEPH, news, msgs) will replace General Growth Properties in the S&P 500 after the close of trading on Friday.

An end in sight?

Despite the continued economic worries, earnings disappointments and weak retail picture, one expert thinks things could start to look up soon.

"A year ago, I said we won't see a bottom until we see a capitulation," BlackRock Chief Executive Officer Larry Fink said at an investment conference in New York Tuesday. "We are seeing a capitulation."

Fink said the financial markets could begin to recover by the middle of next year.

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Any hopes for a recovery were not seen in the global markets.

In Asia, stocks ended the overnight session on a down note. Japan's Nikkei 225 Index fell 1.1%, the MSCI Asia Pacific Index lost 1.7%, but the Hong Kong Hang Seng Index managed to close up 0.9%.

European stocks were also lower today. London's FTSE 100 Index lost 1.5%, the Paris CAC 40 Index lost 3.1%, and the DJStoxx 600 Index was down 3.3%.

Speaker Pelosi to push for automaker bailout

House Speaker Nancy Pelosi said late Tuesday that she plans to push for legislation to help bail out the beleaguered auto sector. "In order to prevent the failure of one or more of the major American automobile manufacturers, which would have a devastating impact on our economy, particularly on the men and women who work in that industry, Congress and the Bush administration must take immediate action," Pelosi said in a statement.

General Motors and Ford Motor (F, news, msgs) reported extraordinarily dismal third-quarter results last week, after posting huge declines in October sales. The industry has been struggling to keep its head above water, announcing cost-cutting measures and slashing jobs, but GM and Ford have been burning through their cash reserves, a key concern for analysts following the companies. GM and Ford said they spent a combined $14.6 billion of their reserves in the most recent quarter.

GM's gain today came after the stock had slumped 13% Tuesday, to close the session at $2.92, the company's lowest close since Feb. 4, 1943, according to Global Financial Data in Los Angeles. GM's market capitalization was less than $1.8 billion as of Tuesday's close. It peaked at $52 billion in 2000.

Ford stock rose 4 cents, or 2.2%, to $1.84. Chrysler is privately held and does not trade publicly.

Prudential cuts dividend

Prudential Financial (PRU, news, msgs) late Tuesday lowered its annual dividend for the first time since going public in 2001, slashing it in half to 58 cents per share. Prudential paid a dividend of $1.15 per share in 2007.

The dividend will be payable on Dec. 19 shareholders of record as of Nov. 24.

Last month, Prudential halted stock buybacks and reported a net loss of $166 million for the third quarter.

The stock fell 3.9% to $26.54.

Andrew Rosenbaum contributed to this report.

Short hits from the markets -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	0.140%	0.195%	-0.055	-67.82%	-95.54%
5-year Treasury note yield	2.364%	2.503%	-0.139	-16.20%	-31.58%
10-year Treasury note yield	3.665%	3.755%	-0.090	-7.68%	-9.17%
30-year Treasury bond yield	4.190%	4.208%	-0.018	-4.10%	-6.03%
Currencies
U.S. Dollar Index	88.050	87.690	0.360	1.97%	14.81%
British pound in dollars	$1.4939	$1.4848	0.0091	-7.14%	-24.90%
Dollar in British pounds	£0.6694	£0.6735	-0.0041	7.69%	33.16%
Euro in dollars	$1.2489	$1.2450	0.0039	-2.04%	-14.55%
Dollar in euros	€ 0.8007	€ 0.8032	-0.0025	2.08%	17.03%
Dollar in yen	95.08	94.64	0.44	-3.59%	-14.99%
Canadian dollar in U.S. dollars	$0.808	$0.807	$0.0018	-2.29%	-18.58%
U.S. dollar in Canadian dollars	$1.238	$1.240	-$0.0018	2.36%	22.82%
Commodities
Gold	$718.30	$732.80	-$14.50	0.01%	-14.28%
Copper	$1.6555	$1.6480	$0.01	-9.49%	-45.56%
Silver	$9.4800	$9.8050	-$0.32	-2.57%	-36.46%
Corn	$3.6950	$3.7425	-$0.05	-7.97%	-18.88%
Crude oil (NYMEX) (per barrel)	$56.16	$59.33	-$3.17	-17.18%	-41.49%