US stocks: Markets hit by durable goods and GM

NEW YORK - US stocks dropped on Thursday for a third straight day on a bigger-than-expected decline in durable goods orders, while General Motors Corp. shares slid on bankruptcy rumours triggered by news that it received subpoenas from US regulators.

Weakness in semiconductor stocks, tied to worries about the US economy and fourth-quarter holiday spending, helped push the technology-laced Nasdaq Composite Index lower.

The three major US stock indexes dropped over 1 per cent, erasing most of the gains from Monday's rally.

The biggest drag on the blue-chip Dow average was GM, down 6.8 per cent at US$27.19 on the New York Stock Exchange. The world's largest automaker said it had been subpoenaed by the US Securities and Exchange Commission as part of an investigation into its accounting practices. The news also drove GM's debt down sharply.

A GM spokeswoman firmly denied any plans to consider a bankruptcy filing.

"GM is such a bellwether, major company in the United States, and if they filed for bankruptcy, that just wouldn't be a good indication as to market conditions," said Tim Heekin, director of trading at Thomas Weisel Partners, a San Francisco investment bank.

The Dow Jones industrial average fell 115.03 points, or 1.11 per cent, to end at 10,229.95. The Standard & Poor's 500 Index dropped 12.48 points, or 1.05 per cent, to finish at 1,178.90. The technology-laced Nasdaq Composite Index slid 36.24 points, or 1.73 per cent, to close at 2,063.81.

After the closing bell, shares of Microsoft Corp. slipped 2.3 per cent in after-hours trading after the world's largest software company posted its fiscal first-quarter results, with revenue edging a touch below Wall Street estimates. The stock fell to US$24.27 on the Inet electronic brokerage system. It closed at US$24.85 on Nasdaq.

"The big thing is the second-quarter sales and earnings (forecast) being below expectations. It's not going to be greeted favorably in this environment," said Tim Ghriskey, chief investment officer of Solaris Asset Management.

During the regular session, shares of Goodrich Corp., the leading US aircraft brake and landing gear manufacturer, tumbled 15 per cent to US$36.74. Earlier, the stock sank 19 per cent to a session low at US$34.75 on the New York Stock Exchange in its biggest single-day percentage slide in four years. Goodrich warned next year's profit would be held back by significant costs.

The semiconductor sector fell as investors worried about lower holiday spending, which would hurt technology companies in the fourth quarter, said Angel Mata, managing director of listed equity trading at Legg Mason Wood Walker.

The Philadelphia Stock Exchange index of semiconductors was down 2.7 per cent. Shares of Intel Corp., part of the index, slipped 1 per cent to US$22.84 on Nasdaq.

The Commerce Department's durable goods report showed a 1.2 per cent decline in orders for non-defence capital goods, excluding aircraft, which economists view as an indicator of future business spending.

"People are saying that capital spending is weakening and the commitment to longer-term capital has waned a bit," said Ned Riley of Riley Asset Management.

Sales of new homes rose more slowly than expected last month, while house prices dropped and the number of new homes on the market hit a record, the Commerce Department said. Average rates for US 30-year mortgages also rose for the seventh straight week, hitting 6.15 per cent last week, mortgage finance company Freddie Mac said.

The Dow Jones index of home builders' shares fell 3.6 per cent. The index includes KB Homes, one of the largest US home builders, down 5 per cent at US$61.37.

Oil company shares, including Exxon Mobil Corp. and Chevron Corp. , fell after Senate Majority Leader Bill Frist ordered a US Senate hearing with testimony from major oil company executives on why energy prices are so high.

Exxon Mobil fell 1.1 per cent, or 60 cents, to US$55.62. Chevron lost 2 per cent, or US$1.16, to US$56.50, both on the NYSE.

Earlier in the day, Exxon Mobil posted record third-quarter profit, due to record high crude oil and natural gas prices earlier this year. But earnings before items missed analysts' estimates.

US December crude futures rose 43 cents to settle at US$61.09 a barrel.

Shares of Liz Claiborne Inc., the maker of Juicy Couture and other women's clothing brands, fell almost 10 per cent, or US$3.73, to US$34.56 on the NYSE. It reported a profit, but cut forecasts for the fourth-quarter and next year, saying steep energy prices and rising interest rates had hurt consumer confidence.

Trading was heavy, with 1.79 billion shares changing hands on the NYSE, above the 1.46 billion daily average for last year. About 1.79 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

Declining stocks outnumbered advancing ones by about 3 to 1 on both the NYSE and the Nasdaq.

- REUTERS