Dow drops 1 percent as HP, weak data weigh

By @ibtimes on

U.S. stocks fell on Tuesday, with the Dow dropping more than 1 percent as a disappointing outlook from Hewlett-Packard Co and weak U.S. data added to growing doubts on the strength of the economy.

The declines sent both the benchmark S&P and Nasdaq below their 50-day moving averages, a technical symbol indicating further market weakness is possible.

Tech stocks fell as investors sold recent winners due to unease about pockets of weakness in the U.S. economy. The PHLX semiconductor index <.SOX>, composed partly of suppliers of desktop computer chips, dropped 1.7 percent.

Shares of defensive companies, however, helped to limit losses. The S&P utilities sector <.GSPU> rose 0.5 percent and American Electric Power gained 2 percent to $38.58.

HP, the world's largest technology company, tumbled 9.1 percent to $36.18 after cutting its forecast due to problems stemming from Japan's earthquake and soft PC sales.

The back half of earnings season -- the very tail end here -- has not been sterling and the early part was as good as it gets, kind of record setting, said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

Through Tuesday, of the 464 companies in the S&P 500 that have reported earnings, 69 percent have topped analyst estimates, according to Thomson Reuters data.

The Dow Jones industrial average <.DJI> dropped 134.00 points, or 1.07 percent, to 12,414.37. The Standard & Poor's 500 Index <.SPX> lost 7.80 points, or 0.59 percent, to 1,321.67. The Nasdaq Composite Index <.IXIC> fell 18.33 points, or 0.66 percent, to 2,763.98.

U.S. housing starts and permits for future home construction fell in April. The report pointed to prolonged weakness in the housing sector.

Massocca said the economic data has not been good.

There are some real fundamental reasons for this market to correct here, he said.

The Federal Reserve reported factory output slumped in April as an automobile part shortage hurt production.

This shows that we are kind of losing momentum ... and it is certainly disturbing considering that we are nearing the end of QE2, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, referring to the U.S. monetary stimulus program known as QE2.

In other earnings news, Wal-Mart Stores Inc posted a bigger-than-expected jump in quarterly profit, but Wal-Mart's same-store sales have now fallen for two years.

(Additional reporting by Angela Moon, Editing by Kenneth Barry)

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