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Stock indexes sink after Google’s muffed earnings release

By Kate Gibson, MarketWatch –

NEW YORK — U.S. stock indexes on Thursday fell for the first day this week as Google Inc.’s profit miss highlighted trouble in the tech sector and a rise in jobless claims offset upbeat manufacturing data.

“As we saw in Google’s report, there are lots of high expectations in some of these widely held names, and when they don’t deliver, they can get hit pretty hard,” said Patrick O’Hare, chief market analyst at Briefing.com.

The technology sector in particular is growth-sensitive, with companies including Intel Corp. and Applied Materials Inc. issuing warnings reflecting weakening demand.

“The spending environment has not been great within that sector, and there are concerns about end demand and how things are going to unfold,” said O’Hare.

The Dow Jones industrial average lost 8.06 points, or less than 0.1 percent, to end at 13,548.94, with International Business Machines Corp. among its 11 decliners after the provider of technology services missed Wall Street’s sales forecasts with a 5 percent decline in the third quarter.

Insurer Travelers Cos. was the top gainer in the Dow after its earnings more than doubled.

The S&P 500 index retreated 3.57 points, or 0.2 percent, to 1,457.34.

The Nasdaq composite shed 31.25 points, or 1 percent, to 3,072.87.

In its worst percentage drop since January, Google shares declined 8 percent after the search engine’s third-quarter report was released ahead of schedule, with Google blaming printer R.R. Donnelley & Sons Co. for filing its quarterly statement early to the Securities and Exchange Commission.

Equities briefly came off session lows after the Federal Reserve Bank of Philadelphia reported regional manufacturing rebounded in October and the Conference Board’s index of leading economic indicators climbed 0.6 percent in September.

Initial jobless claims rose by 46,000 to 388,000 last week, up from a revised 342,000 the prior week, with the four-week average barely changed at 365,500.

The price of crude oil fell 2 cents to $92.10 a barrel on the New York Mercantile Exchange.

Stocks have been stuck in a range, with the S&P 500 trading between 1,430 and 1,470 or so in recent weeks, said Mike McGervey, president of McGervey Wealth Management in North Canton, Ohio, who lists the slowdown in China, Europe’s troubles and the “dysfunctional” U.S. fiscal policy as among the wild cards compressing stocks prices.

“What is still very underappreciated in the market is that when we talk about the fiscal cliff, everyone says we need to compromise. But compromise can still have a destructive outcome. And the idea of an adverse outcome is not in the market,” O’Hare said of the automatic tax increases and spending cuts that will occur on Jan. 1 if Congress isn’t able to reach a deficit-reduction agreement.

Pacific Investment Management Co. on Thursday said the U.S. credit rating would be cut as the drama over the so-called fiscal cliff plays out, Bloomberg News reported. “The U.S. will get downgraded; it’s a question of when,” said Scott Mather, Pimco’s head of global portfolio management, according to the news service.

That said, “Pimco expects the debate over the fiscal cliff will end in fiscal consolidation, but not a fiscal catastrophe. Of the $700-billion-plus in potential fiscal contraction on the table, we expect around $200 billion to $250 billion to actually materialize,” Josh Thimons, chairman of Pimco’s America’s portfolio committee, said emailed commentary.

Lam Research Corp. shares rallied a day after the semiconductor-equipment maker reported fiscal first-quarter revenue and earnings that beat estimates.

“Everyone was braced going into the fourth quarter from what we might expect from third-quarter earnings, and so far it’s not quite as gloomy as many of us were expecting,” said McGervey.

BB&T Corp. fell after the bank reported third-quarter profit below estimates.

Philip Morris International Inc.’s shares declined after the tobacco company reported earnings below estimates.

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