U.S. stocks fell on Wednesday as signs of more labor market deterioration and a disappointing revenue outlook from technology bellwether Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) heightened concerns about the severity of the recession.
Coming two days before the key U.S. nonfarm payrolls report for December, the ADP private sector jobs data underscored the challenge facing President-elect Barack Obama as he pushes ahead with plans to revive the world's largest economy.
Even before Intel's gloomy outlook the corporate news flow had turned bearish as Alcoa said late on Tuesday it would cut more than 15,000 jobs, halve capital spending and sell businesses as it reduces aluminum production in the face of the global economic downturn. For more see [ID:nN06444898].
Shares of chip-maker Intel tumbled 6.3 percent to $14.41 on Nasdaq, putting the stock among the top drags on the Dow, along with Alcoa (AA.N: Quote, Profile, Research, Stock Buzz), down 8.4 percent at $11.10.
"I can't imagine this (ADP data) is going to bode very well for any kind of forecasting going into the nonfarm payroll and unemployment rate numbers that we're going to see on Friday," said Dave Lutz, managing director at Stifel Nicolaus in Baltimore. "It is absolutely terrible."
The Dow Jones industrial average .DJI fell 188.77 points, or 2.09 percent, to 8,826.33. The Standard & Poor's 500 Index .SPX slid 19.64 points, or 2.10 percent, to 915.06. The Nasdaq Composite Index .IXIC tumbled 43.06 points, or 2.61 percent, to 1,609.32.
Other tech bellwethers heading lower included Apple (AAPL.O: Quote, Profile, Research, Stock Buzz), down 2.3 percent at $90.89, and Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz), off more than 3 percent at $20.10.
The semiconductor index was down nearly 5 percent after Intel said preliminary fourth-quarter revenue was worse than expected, indicating the heavy toll from the economic slump on both business and consumer spending.
In a sign of how broadly fallout from the recession is spreading, Time Warner Inc (TWX.N: Quote, Profile, Research, Stock Buzz) forecast a fourth-quarter loss, sending its stock down nearly 8 percent to $10.12. [ID:nN07469412].
According to ADP, a private employment service, U.S. private employers shed 693,000 jobs in December, up sharply from the revised 476,000 jobs lost in November and far more than economists estimated.
Obama, set to be sworn in on Jan. 20, has proposed the largest U.S. infrastructure investment since the 1950s and massive tax cuts for consumers and businesses.
But it is uncertain how soon the boost will translate into an upturn in profits to sustain the market's attempted recovery since its November bear market low as job losses mount.
On Tuesday the minutes of the U.S. Federal Reserve's Dec. 15-16 policy showed that authorities expected the economic outlook to be weak for some time. [ID:nN06439238]
Obama was scheduled to make more personnel announcements on Wednesday but the focus continued on the economy. The new U.S. Congress began work to pass a stimulus package. Obama expects to inherit a budget deficit approaching $1 trillion and says his administration will have to make tough budget choices.
The benchmark S&P 500 .SPX has risen 21 percent since its Nov. 21 low. Sentiment also took a knock on a revelation that India's Satyam Computer Services (SAY.N: Quote, Profile, Research, Stock Buzz) (SATY.BO: Quote, Profile, Research, Stock Buzz) falsely inflated earnings for years. The news sent India's main equity index SENSEX .BSESN plunging 7 percent. [ID:nSP387669].
The fraud at the major business software and back-office services company could add to investor anxiety about the integrity of the markets, said Rick Meckler, president of investment firm LibertyView Capital Management in New York. (Additional reporting by Herb Lash; Editing by James Dalgleish)
