US Market closes lower on subprime and earning worries

Earnings report in Technology sector spurs sell-off though Dow recovers from a 148 points fall

US Market closed lower today, Wednesday, 18 July, 2007 snapping a five day winning streak for the market. Bear Stearns reportedly telling investors that its two troubled hedge funds are nearly worthless ushered in the first wave of consolidation throughout the heavily weighted Financial sector. Disappointing results in the tech sector last night kicked things off on a sour note since the morning.

Dow was down by as much as 148 point at one point of time. But it recouped back most of its loss in the final half hour of trading. Fed Chairman, Ben Bernanke’s comments did play some role in cooling investor sentiments.

The Dow Jones Industrials closed lower by 53 points at 13918. Tech heavy Nasdaq lost 12.6 points to close at 2699. S&P 500 closed lower by 3.2 points at 1546.

Twenty-one out of the thirty Dow stocks closed in red today. Intel and JP Morgan, were the top most Dow losers today.

Earlier in the day today, the Fed Chairman did say growth will pickup up next year and that inflation is likely to recede. However, Bernanke also said that conditions in the subprime mortgage sector have "deteriorated significantly," and that delinquencies and foreclosures are likely to get worse before they get better

The yield on the 10-year note slipped below the psychologically important 5.00% level was a positive factor.

Intel and Yahoo – both slip by 4.8% and act as an overhang for Technology

When market opened in the morning, stocks opened lower across the board as everything from renewed subprime woes to mixed earnings reports armed the bears with the means to take some money off the table.

Stocks retraced session lows as Bernanke's prepared remarks did nothing to calm investors' nerves in the face of an already dismal day of news items.

Financials and Technology collectively accounted for the maximum sell-offs. Sell-offs in both sectors eliminated much of the leadership that had recently helped the Dow and S&P 500 hit historic highs.

Last night, Intel came out with its second-quarter earnings and disappointed investors. Wall Street wasn't too happy with Yahoo earnings report either. Both the stocks together accounted for a good plunge for Nasdaq. Both the stocks fell by 4.8%.

The indices were at their best levels of the afternoon but continued to languish in negative territory as market breadth remained decidedly bearish.

IBM shares strike 5 year high today

After the close, IBM said it earned $1.55 a share in the second quarter, including a tax gain worth 5 cents a share, better than the Wall Street estimate of $1.47 a share. IBM shares touched a 5 year high today after the share jumped 2.8% to $111 today before announcing its result.

Crude oil futures increased today and crossed the $75 mark at close after an Energy Department report showed that U.S. gasoline inventories unexpectedly fell last week. Crude-oil futures for light sweet crude for August delivery closed at $75.05/barrel (higher by $1.05/barrel or 1.4%) on the New York Mercantile Exchange.

Despite the rise in refinery activity, motor gasoline supplies fell for the first time in three weeks, down 2.3 million barrels at 203.3 million to stand 4.5% below the year-ago level. Gasoline imports plunged 36% to an average 915,000 barrels a day.

Trading volumes showed 1.7 billion shares exchanging hands on the New York Stock Exchange and 2.2 billion on the Nasdaq. Declining issues topped gainers by 20 to 11 on the NYSE and by 9 to 5 on the Nasdaq.

For tomorrow, Initial Claims will be out at 8:30 ET. Leading Indicators will be out at 10:00 ET while the Philly Fed will offer an update on manufacturing conditions at 12:00 ET. The FOMC Minutes from the June 27-28 meeting will hit the wires at 14:00 ET. On the earnings front, Microsoft and AMD are the major names after close.