Stocks pulled back again Wednesday, with investors uneasy about the health of the economy after reports from big names like Apple Inc. and Motorola Inc. dashed any notion that the Federal Reserve's emergency rate cut could in short order patch up the economy. Bond prices rose but came off their highs after stocks pared their losses.
Wall Street's weak opening occurred in tandem with a retrenchment in European markets, which fell after European Central Bank President Jean-Claude Trichet appeared unmoved by the Federal Reserve's decision to cut interest rates, according to Dow Jones Newswires. Some investors had hoped the ECB would signal willingness to cut rates.
The Fed's decision Tuesday to lower its federal funds rate by a steep 0.75 basis points to 3.5 percent eventually helped calm U.S. markets, but it remains clear that investors have doubts about the potency of the Fed action. Rate cuts typically take months to work their way into the economy.
Meanwhile, a disappointing forecast from Apple showed how fragile investor sentiment is.
The maker of the iPod issued a forecast for its fiscal second quarter that said sales would likely grow by 29 percent. The figure would represent faster growth than in earlier years but fell short of what Wall Street had expected.
Apple's expectations appeared to confirm worries about consumer spending. As consumers account for more than two-thirds of the economy, investors are keen on learning whether retailers and other companies will have a harder time prying open wallets.
Shares of Apple fell $17.73, or 11.4 percent, to $137.91.
In midmorning trading, the Dow Jones industrial average, which had been down nearly 265 points early in the session, fell 123.97, or 1.04 percent, to 11,847.22.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 13.72, or 1.05 percent, to 1,296.78, and the Nasdaq composite index slid 33.41, or 1.46 percent, to 2,258.86.
The decline in stocks, while sizable, was in the early going less severe than in the minutes after the opening bell Tuesday, when the Dow fell by as much as 465 points in the first minutes of trading. It ended the day down 128.11, or just more than 1 percent, at 11,971.19.
Bond prices rose Wednesday as more investors sought the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.38 percent from 3.41 percent late Tuesday. The dollar was mixed against other major currencies.
In other corporate news, Motorola fell $1.82, or 14.8 percent, to $10.50 after reporting its earnings fell sharply in the fourth quarter and the maker of mobile phones warned that the recovery in its struggling handset unit will take longer than expected.
United Technologies Corp., one of the 30 stocks that comprise the Dow industrials, said its fourth-quarter earnings rose 23 percent as sales increased across each of its businesses. The results from the parent of names like Sikorsky and Otis topped Wall Street's forecast, according to Thomson Financial. The stock rose 40 cents to $67.64.
Pfizer Inc., also a Dow component, reported a 70 percent decline in its fourth-quarter profit from the same period a year ago, which included the sale of the company's consumer health business. Excluding that one-time gain, profits topped Wall Street's expectations. Shares of the world's largest drug maker rose 13 cents to $22.36.
Delta Air Lines Inc., the No. 3 U.S. carrier, reported it was hampered by high fuel prices in the fourth quarter but was able to post a narrower loss on a solid increase in sales. Delta rose 8 cents to $14.93.
While investors worldwide remain concerned about the health of the U.S. economy, the Fed's rate cut and Wall Street's ability to come off its lows Tuesday helped drive a rebound in Asian trading Wednesday.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to a heavy 333.5 million shares.
The Russell 2000 index of smaller companies fell 6.52, or 0.97 percent, to 665.05.
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