US stocks carved out fresh lows for 2005 on Tuesday as earnings season got off to a disappointing start, after aluminium producer Alcoa Inc missed Wall Street expectations and chip maker Advanced Micro Devices Inc issued a sales warning. However, after the market closed, tech bellwether Intel Corp rose 3 percent to $23.17, after it reported higher-than-expected revenue and profits for the last quarter. "I think it's exceptional across the board," said Stephen Leeb, president Leeb Capital Management in New York, who has $110 million assets under management, including Intel.
"Revenue was better than expected. The number that strikes me is that they are projecting 2005 gross margin of 58 percent, and I don't think anyone was near that. It's a terrific report. Intel is clearly the bellwether, and this report could easily turn the tech sector," Leeb said.
The Dow Jones industrial average closed down 64.81 points, or 0.61 percent, at 10,556.22. The Standard & Poor's 500 Index was down 7.26 points, or 0.61 percent, at 1,182.99. The Nasdaq Composite Index fell 17.42 points, or 0.83 percent, to 2,079.62.
All three indexes closed at lows for the year, with the Dow and S&P at their lowest in more than four weeks, while Nasdaq ended at its lowest in seven weeks.
Hewlett-Packard Co dragged on the Dow and the S&P 500, tumbling 3.6 percent, or 76 cents to $20.05, after Morgan Stanley lowered its investment rating on the computer maker to "underweight" from "equal weight."
Meanwhile, chip stocks were bruised by a warning late Monday from AMD that its fourth-quarter revenue would fall below Wall Street's expectations. AMD slumped 26 percent, down $5.27 to $14.86, while the Philadelphia Semiconductor Index was down 2.5 percent. "The biggest damper on the market was semiconductor stocks," said Robert Drust, managing director of listed trading regional investment bank Wedbush Morgan. "People were looking to maybe build some positions and were after some favourable indications from them - but the AMD news blew that out of the water."
Apple Computer Inc also fell, down 6.4 percent at $64.56. The company said it sold 4.5 million of its iPod portable digital music devices during the 2004 holiday quarter - slightly below some Wall Street estimates - as it announced plans to launch new products.
Dow component Alcoa, which kicked off the earnings reporting season on Monday, fell nearly 3 percent to $29.65 after reporting quarterly profits that were below analysts' estimates, partly due to higher energy costs.
Steel stocks took a beating after CIBC World Markets lowered its investment rating on the steel sector, citing expectations for price pressure. Steel maker United States Steel Corp fell 5.4 percent, or $2.65 to $46.34.
Oil prices closed slightly higher. NYMEX crude for February delivery settled 35 cents higher at $45.68 a barrel, although off its session high of $46.15. Higher oil prices generally dampen equities because of the impact on corporate profits and consumer spending.
In other news, President George W. Bush's Social Security plans had an impact on the market earlier in the session, said Drust.
"I think the market sold off a little when Bush was first talking but then came back - I think the Social Security plan about how he wants to be able to invest in the market would certainly be a positive for stocks," said Drust.