Stocks close sharply lower, weighed down by profit warnings, job outlook

NEW YORK — Bleak outlooks from Intel, Alcoa and Time Warner and unnerving signs about unemployment sent stocks sharply lower today.

The forecasts from industry bellwethers have caused investors to reconsider the notion that the economy might begin to rebound in the second half of the year.

The Dow Jones industrial average closed down 245.40, or 2.7 percent, at 8,769.70. The Standard & Poor's 500 index fell 28.05, or 3 percent, at 906.65, and the technology-heavy Nasdaq composite index was off 53.32, or 3.2 percent, at 1,599.06.

Unlike the panicked swings seen last fall, however, the decline was more orderly, and some retrenchment had been expected following sharp rises in the final days of 2008 and into 2009.

Wall Street has been absorbing poor economic and corporate news far better since last November as some have dared to hope for a recovery in the second half of this year or early 2010, but the latest round of unnerving news proved to be too much to set aside.

Joe Saluzzi, co-head of equity trading at Themis Trading, said the market is simply reacting to the day's drubbing of bad news. "One too many punches and the fighter finally went down," he said.

Media industry bellwether Time Warner said today that it would book a $25 billion impairment charge in the fourth quarter for its cable, publishing and AOL units, while Intel said it now expects fourth-quarter revenue to drop a greater-than-expected 23 percent on a further weakening in demand from computer makers. The company already reduced its forecast in November.

Alcoa had jolted investors late Tuesday with an announcement that it would slash its annual output by more than 18 percent and cut its global work force by 13 percent.

The market was already worried about what the Labor Department's report on employment would bring on Friday, and received a disappointing harbinger today as the ADP National Employment Report said private-sector employment fell by 693,000 in December, more than had been expected. The report is an unofficial gauge that the market has been increasingly monitoring as U.S. job losses mount.

The ADP report is making investors question whether government steps to revive the economy will prove sufficient.

"The market has shrugged off some bad news recently, and it's starting to get to the point where it can't do that anymore," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group.

The Dow has rallied about 20 percent since its multiyear lows in late November, and the Standard & Poor's 500 index has surged nearly 25 percent. The S&P 500 began Wednesday's session up 3.5 percent for the first three trading days of 2009.

"We've had a big move," Fullman said. "What we're looking at now is just people getting a little cautious here."

Bond prices were mixed today. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.49 percent from 2.47 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, fell to 0.08 percent from 0.14 percent.

The dollar fell against most other major currencies, while gold prices declined.

Light, sweet crude slumped 12 percent, falling $5.95 to settle at $42.63 a barrel on the New York Mercantile Exchange. The decline, which erased a week of gains, came after the government reported commercial crude oil inventories jumped well beyond the increase analysts expected. The weak economy has eroded demand.