Oil prices and Intel news deflate market

NEW YORK » Wall Street retreated yesterday as mixed earnings news and rising oil prices prompted investors to take profits from a sharp rally in the prior session.

A disappointing forecast from Intel Corp. dragged on the Nasdaq composite index.

Better-than-expected results from Apple Computer Inc. and Motorola Inc. countered a hefty loss at Ford Motor Co. But investors worried about a slowdown in tech spending were rattled by a steep earnings drop at Intel, which gave no indications that conditions would improve in the second half of the year.

Coupled with anxiety about political unrest in the Middle East, the blend of earnings data dampened the market's cheer over signals that the Federal Reserve may be near an end to its string of interest rate hikes. On Wednesday, the Dow Jones industrials surged 212 points after Fed Chairman Ben Bernanke said the economy was moderating and inflation was contained.

Although Bernanke reiterated his comments yesterday, the pullback reflected fear that high oil prices could fuel inflation and cause the Fed to keep boosting rates. Minutes from the Fed's June meeting added pressure on stocks late in the day, with the central bank saying there is still significant uncertainty about future rate hikes.

"From a fundamental perspective, with mixed earnings and positive news from the Fed, this would qualify as somewhat of an aimless market," said Chris Johnson, manager of quantitative analysis for Schaeffer's Investment Research. "Technicals will give a good bit of direction to a market that's otherwise directionless."

At the close, the Dow declined 83.32, or 0.76 percent, to 10,928.10.

Broader stock indicators also fell sharply. The Standard & Poor's 500 index dropped 10.68, or 0.85 percent, to 1,249.13, and the technology-laden Nasdaq lost 41.29, or 1.98 percent, to 2,039.42. The Russell 2000 index of smaller companies sank 18.73, or 2.67 percent, to 683.61.

Bonds extended their advance, with the yield on the 10-year Treasury note falling to 5.02 percent from 5.06 percent late Wednesday. The U.S. dollar was flat against other major currencies; gold prices dipped to about $630 an ounce.

Oil prices bounced back from three days of declines driven by profit taking and an unexpected rise in U.S. reserves reported Wednesday. A barrel of light crude gained 42 cents to settle at $73.08 on the New York Mercantile Exchange.

Wall Street recently has been stymied by an unrelenting wave of negative headlines, giving investors few reasons to put money in the market.