Stocks fall on fresh evidence of economic woes

Stocks fell sharply Wednesday, as a handful of bleak profit outlooks and more evidence of escalating unemployment served as stark reminders that the economy remains in rough shape. The Dow Jones industrials dropped more than 180 points.

Underscoring investors' growing fears that 2009 is shaping up to be a difficult year for many sectors, Time Warner and Intel on Wednesday issued disappointing guidance.

Time Warner Inc. said it expects to record a fourth-quarter $25 billion impairment charge for its cable, publishing and AOL units that will lead to an operating loss for the period and a loss for the full year. It had expected a profit between $1.04 and $1.07 per share for the year.

Meanwhile, computer chip maker Intel Corp. said it expects fourth-quarter revenue to drop 23 percent, below prior estimates, due to weak demand and inventory reductions by its computer maker customers.

Time Warner shares shed 97 cents, or 8.8 percent, to $10.01. Intel shares plunged nearly 6 percent, or 88 cents to $14.49.

Aluminum producer Alcoa Inc.'s decision to slash jobs further jolted investors.

Alcoa said late Tuesday it is reducing its global work force by about 13,500, or 13 percent, by the end of the year and lowering total output by more than 18 percent annually. Shares of Pittsburgh-based Alcoa tumbled 70 cents, or 5.8 percent, to $11.42.

The announcement comes ahead of the Labor Department's report Friday on the job market - a closely watched barometer of the economy's health. The market got a disappointing harbinger Wednesday in the form of the ADP National Employment Report, an unofficial gauge that the market has been increasingly monitoring as U.S. job losses mount. The report said private sector employment fell by 693,000 in December, worse than expected.

When people lose their jobs, they tend to spend less and fall behind on their debt payments. Investors fear that further declines in consumer spending will prolong the recession.

"People are concerned with the employment report coming out on Friday," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "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."

The Dow has rallied about 20 percent since its multiyear lows in late November 2008, and the Standard & Poor's 500 index has surged nearly 25 percent.

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

In late morning trading, the Dow dropped 186.46, or 2.07 percent, to 8,828.64. The Standard & Poor's 500 index fell 21.57, or 2.31 percent, to 913.13, while the Nasdaq composite index fell 41.70, or 2.52 percent, to 1,610.68.

The Russell 2000 index of smaller companies was down 14.98, or 2.91 percent, to 499.73.

Declining issues outnumbered advancers by about 6 to 1 on the New York Stock Exchange, where volume came to 297.50 million shares.

On Tuesday, Wall Street overcame gloomy economic readings to finish with a moderate advance. The market's economic worries had been calmed a bit in recent days by President-elect Barack Obama's proposal to slash taxes and help businesses. The stimulus package could cost as much as $775 billion, though, and Obama said Tuesday the nation could face trillion-dollar deficits "for years to come."

Bond prices rose on Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.46 percent from 2.47 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, edged lower to 0.11 percent from 0.14 percent.

The Treasury plans to auction a record $30 billion in three-year notes on Wednesday.

The dollar fell against other major currencies. Gold prices also fell.

Crude oil prices slipped $2.46 to $46.12 a barrel on the New York Mercantile Exchange.

In Asian trading, Japan's Nikkei stock average rose 1.74 percent, and Hong Kong's Hang Seng index fell 3.37 percent. In afternoon trading in Europe, Britain's FTSE 100 fell 2.31 percent, Germany's DAX index fell 1.37 percent, and France's CAC-40 fell 1.14 percent.

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