Stocks Set to Plunge on Intel Shortfall

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NEW YORK — Wall Street readied for a second straight day of losses Wednesday after technology leader Intel Corp. announced disappointing earnings and a dim outlook.

Investor patience already is sorely tested by economists' predictions that a recession is at hand and by unsteadiness in the financial sector, where many banks are struggling to restore badly damaged balance sheets.

Intel's failure to meet earnings and revenue forecasts for the fourth quarter and new first-quarter revenue guidance that is at the low end of analysts' forecasts should weary investors further. Earlier this week there was market speculation that the technology sector, which sometimes benefits from a weak dollar and overseas strength, might be able to withstand the weakness sweeping other parts of the economy.

Intel stock fell as much as 15 percent in after hours trade and contributed to heavy selloffs in Asia on Tuesday. The share off $2.86, or 12.6 percent, at $19.85 before the opening.

Yet the technology sector saw some cheer Wednesday, thanks Oracle Corp.'s new deal to buy BEA Systems Inc. for about $7.85 billion. Last year BEA rejected a less expensive bid from Oracle, which raised its offer but not to the level sought by BEA.

The Oracle-BEA news helped lift futures contracts off their worst levels. The futures contract for the Dow Jones industrial average last fell 103 points to 12,461. Intel is a Dow component.

Futures contracts for the S&P 500 dropped 12.40 points to 1,375.60, while the Nasdaq 100 contract gave up 28.0 points to 1,884.0.

Treasury prices rose on the expected declines for stocks as oil futures came under pressure.

The dollar was back in the spotlight Wednesday. It hit sharp lows overnight in Asian trade on recession fears, but later recovered some strength. The improvement pushed gold futures below the closely watched $900 an ounce level for the first time this week as the two markets often trade in opposite directions.

JPMorgan Chase & Co. Wednesday offered a first-quarter earnings report that revealed relatively light exposure to the subprime lending crisis as it took a writedown of $1.3 billion, which was smaller than the massive losses of peers like Citigroup Inc. The company had a quarterly profit that fell below analysts' expectations.

On a worrisome note, the bank warned of difficult conditions ahead in 2008 and said profit was reduced by problems with home equity loans that underscore the mounting pressures in consumer lending. The company's stock fell 17 cents, or 0.43 percent, to $39, before the opening.

Wells Fargo & Co. revealed its first decline in profit in more than six years and also cited rising losses on home equity loans.

The Labor Department reported that consumer prices in December showed an increase of 0.3 percent for the headline figure and a 0.2 percent advance for the core rate, which strips out food and energy prices. Both figures had been expected to rise by 0.2 percent, according to Thomson/IFR.

The Federal Reserve, in setting monetary policy, is known to pay closer attention to the core rate and the report should not rattle markets much. At this point investors are far more worried about the prospect of slower growth than that of higher inflation.

In addition, Fed Chairman Ben Bernanke already has sent strong signals that another rate cut is on the way this month. The Fed's next monetary policy meeting is Jan. 29-30, and some investors are hoping for a rate cut before then.

December's industrial production report from the Fed is expected to show a 0.2 percent decline in output, after a 0.3 percent November gain. The report will come out at 9:15 a.m. Eastern.

In overseas trade, Japan's Nikkei gave up 3.35 percent. In Europe, London's FTSE 100 fell 0.82 percent, Frankfurt's DAX fell 0.98 percent and Paris' CAC forfeited 0.34 percent.

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