Stocks Take Hit on Gloomy Earnings Reports

Sagging corporate profits weighed on investor confidence today, sending stocks down.

The sell-off wiped away half of yesterday's rally, which included a more than 400-point gain by the Dow Jones industrial average. It is not unusual for investors to lock in some profits after such a rally, but stocks were largely negative today, reflecting concerns about the degree to which the financial crisis is weighing on corporate balance sheets, analysts said.

The Dow fell 2.5 percent, or 231 points, to close at 9,033.66, while the broader Standard & Poor's 500-stock index fell 3 percent, or 30 points, to 955.05.

The Nasdaq took the biggest hit today, falling 4.4 percent, or 73 points, to close at 1,696.68. Texas Instruments, the semiconductor giant, reported a 26 percent drop in third-quarter net profits and said revenue would "decline substantially" during the fourth quarter. Its stock was down 6 percent today.

Sun Microsystems was down 17.5 percent today after it said it expects a drop in revenue and a profit loss during the first quarter of 2009. "Sun and its customers are seeing the impact of a slowing economy," Jonathan Schwartz, Sun's chief executive, said in a statement.

Also weighing on the market today was billionaire investor Kirk Kerkorian's announcement that he had sold 7.3 million of his shares in Ford and could sell the rest. In just the latest indication of the slump in the auto industry, Kerkorian's firm, Tracinda Corp., said in a Securities and Exchange Commission filing that, given economic conditions, it would focus on gambling and the energy sector.

Ford was down 6.9 percent today.

The Dow also was led down by a drop at Citigroup after a Goldman Sachs analyst added the firm to a "conviction sell list" today and said Citigroup would not return to profitability until the second half of 2009. Citigroup stock closed down 6 percent today.

"Citi continues to have some of the highest levels of exposure to risky asset" in the industry, William Tanona, the Goldman analyst, said in a report.

Instead, investors should buy Morgan Stanley, the report said. The company's stock rose 2 percent.

It is not unusual for stocks to slump after a rally as investors cash in profits. But the degree of the sell-off could be a telling indicator of the depth of investor optimism that the market is ready to rebound from the financial crisis.

Investors were cheered yesterday by Federal Reserve Chairman Ben S. Bernanke's support for another stimulus package and indications that government efforts to thaw the credit markets are making some headway.