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CBS MarketWatch
U.S. stocks fumble amid weak data, Yahoo decline
Thursday July 10, 11:23 am ET
By Julie Rannazzisi


NEW YORK (CBS.MW) -- U.S. stocks extended losses Thursday following declines in Yahoo and amid more evidence of weakness in the labor market.
Internet stocks paced declines in the tech sector in the aftermath of Yahoo's quarterly results while retailers sagged after releasing unimpressive monthly same-store sales numbers. Only gold stocks squeezed out a gain.

The Dow Jones Industrial Average (CBOT^DJINews) descended 90 points, or 1 percent, to 9,067, tugged lower by the shares of Hewlett-Packard, International Paper, Home Depot and AT&T.

Only three of the Dow's 30 components edged higher: Coca-Cola, General Electric and Procter & Gamble.

The Nasdaq Composite (NasdaqSC^IXICNews) eased back 24 points, or 1.4 percent, to 1,723 after touching a fresh 15-month high on Wednesday. The Nasdaq 100 Index (NasdaqSC^NDXNews) of larger- capitalization stocks slid 20 points, or 1.6 percent, to 1,274.

The Standard & Poor's 500 Index (CBOE^SPXNews) slumped 1.1 percent while the Russell 2000 Index (CBOE^RUTNews) of small-capitalization stocks gave up 1.5 percent.

Volume amounted to 475 million on the NYSE and to 652 million on the Nasdaq Stock Market. Decliners bested advancers by 22 to 8 on the NYSE and by 20 to 9 on the Nasdaq.

Yahoo slides, Genentech recovers
Profit takers took Yahoo down 7 percent after the company posted an in-line second-quarter profit late Wednesday and reported slightly better-than-expected revenue. The Web portal (NasdaqNMYHOONews) registered mesmerizing gains in the first half of the year and was the best performer among Nasdaq 100 stocks with a gain of 100 percent.

Smith Barney told clients that while the quality of Yahoo's results continues to improve -- with more diversified revenue and strong user growth and margins -- it also believes that shares are "appropriately priced" at current levels.

The biotech sector sagged, though Genentech (NYSEDNANews) managed a 0.1 percent push into the plus column after sliding early on. The firm reported late Wednesday a second-quarter profit that handily topped analysts' expectations. See Biotech Report.

The retailers were busy unearthing their monthly comparable-store sale results. Among the highlights: Dow component Wal-Mart (NYSEWMTNews) reported a 2.7 percent increase in June same-store sales; J.C. Penney (NYSEJCPNews) registered a 0.1 percent increase in comparable department store sales in June and said it expected July sales to come in flat to slightly higher; Gap (NYSEGPSNews) checked in with a 10-percent jump in June same-store sales; and Kohl's (NYSEKSSNews) reported a 2.4 percent decline in June same-store sales while also lowering its second-quarter earnings outlook.

Kohl's shed 3.4 percent, Wal-Mart fell 1 percent, Gap slid 1.3 percent and J.C. Penney added 0.6 percent.

Chip stocks (Philadelphia^SOXXNews) were among the biggest tech decliners, with Micron Technology off over 3 percent an Texas Instruments down 2.5 percent. Late Wednesday, TI (NYSETXNNews) sold 24.7 million shares of Micron stock for pre-tax proceeds of $106 million, which will be recognized in the third quarter. Separately, Micron (NYSEMUNews) was upgraded by UBS to a "buy" rating from a "neutral."

Hardware stocks were also mired in a funk as Dell Computer (NasdaqNMDELLNews) forfeited 0.5 percent. J.P. Morgan told clients its outlook on PC demand remained cautious following comments from a Dell executive that business conditions were still difficult.

In the software sector, Oracle (NasdaqNMORCLNews) edged down 0.6 percent after a meeting with analysts Wednesday, during which it reaffirmed its strong intent to acquire PeopleSoft. Merrill Lynch and SG Cowen both expressed their belief that the stock is fairly valued at current levels and that upside potential is thus limited. See story.

See Movers & Shakers for the latest individual stock action.

Treasurys higher; jobless claims rise
Government bonds rose for a second straight session, underpinned by the weaker stock market and the release of some soft economic news.

The 10-year Treasury note ascended 3/32 to yield (CBOE^TNXNews) 3.67 percent while the 30-year government bond rose 1/32 to yield (CBOE^TYXNews) 4.70 percent.

The labor market remains sluggish and signs of improvement continue to be hard to come by. Jobless claims climbed 5,000 to 439,000 in the latest week while the more dependable four-week moving average advanced 1,000 to 426,750. and check economic calendar and forecasts.

"The data don't show anything promising for a turnaround in the weak labor market," said CIBC World Markets economist Avery Shenfeld.

Meanwhile, prices of imported goods climbed 0.8 percent last month, buttressed by the soft U.S. dollar, while export prices slipped 0.2 percent.

In the currency sector, the U.S. dollar was generally higher against its major counterparts: The euro declined 0.2 percent to $1.1325 while the British pound slumped 0.8 percent to $1.6247.

Against the Japanese currency, the greenback shed 0.1 percent to 117.78 yen.

The European Central Bank left short-term rates unchanged at its policy-setting meeting Thursday, as had been expected by most economists. The Bank of England, on the other hand, sliced short rates by 1/4 point to 3.50 percent, citing the sluggish global economy and below trend production in the United Kingdom.