NEW YORK, Jan 16 (Reuters) - Stocks are set to open sharply lower on Wednesday on a host of disappointing earnings news and a warning by No. 1 chipmaker Intel Corp. (NasdaqNM:INTC - news) that it was slashing capital spending this year.
Equity index futures were trading lower across the board, led by technology, suggesting a lower open for the high-techs, blue chip stocks as well as the broader stock market.
``The Intel news will be reflected in some of the other technology stocks ... I still think we have further to go on the downside,'' said Bill Punk, managing partner at Punk Ziegel & Company in New York.
Investors were also awaiting the release ahead of the 9:30 a.m. (1430 GMT) market open of some key economic data which could impact trading. These include reports on retail-level inflation and industrial production, both for December, and business inventories for November.
The Federal Reserve, later during the session, releases its Beige Book survey of economic conditions.
Stocks eked out gains after a seesaw session on Tuesday, as signs of resilience in retail sales shored up investors' confidence in an economic rebound and overshadowed worries about sliding corporate profits.
The market flipped back and forth, in and out of positive territory throughout the day, as Wall Street braced for earnings reports from tech bellwethers like semiconductor giant Intel. Stocks ended the session higher, breaking a six-day losing streak for the Dow Jones Industrial Average (^DJI - news).
On Tuesday, the blue-chip Dow rose 32.73 points, or 0.33 percent, to 9,924.15, while the broad Standard & Poor's 500 (^SPX - news) rose 7.78 points, or 0.68 percent, to 1,146.19. The tech-laden Nasdaq Composite (^IXIC - news) advanced 10.17 points, or 0.51 percent, to 2,000.91, a day after breaching the closely watched 2,000-point watermark for the first time since Jan. 2.
Intel after the close reported sharply lower quarterly earnings because of weak demand for personal computers, but both profits and revenues of the top chipmaker topped forecasts amid a bounce in PC sales over the holidays.
Dishing out more negative news, Intel said it does not yet see any signs of an economic recovery and forecast first-quarter sales of $6.4 billion to $7.0 billion, implying revenue either flat or falling as much as 8.3 percent from the fourth quarter.
Shares of Intel fell in after-hours trading as well as in the pre-market on Wednesday, fetching $33.79 on the Instinet electronic trading system, from a close of $34.68.
Makers of semiconductor equipment, like Applied Materials Inc. (NasdaqNM:AMAT - news), tumbled after Intel said it planned to cut its capital spending budget by 25 percent in 2002, below many analysts' expectations. Applied Materials fell to $42.50 pre-open from $45.61 at Tuesday's close.
Stocks of Nasdaq's 100 biggest tech companies slipped about 1 percent.
``Cutting capex doesn't help but forward guidance was also less than what many people had expected,'' Punk said.
Equity futures were trading lower early on Wednesday, flagging a lower Wall Street open. The Nasdaq 100 contact lost 32.50 points to 1,592, suggesting a decline of 2 percent at the open. The Standard & Poor's 500 (^SPX - news) contract was down 7.50 points to 1,141.50 and Dow futures lost 49 points to 9,878.
On the economic front, the Consumer Prices Index (CPI), is due to be released at 8.30 a.m. and is largely expected to paint a tame inflation picture at the retail level last month. Overall, no rise in prices is seen relative to November, and excluding volatile food and energy prices, are seen edging up 0.1 percent vs. 0.4 percent in the prior month.
U.S. Treasury Secretary Paul O'Neill said after the market close on Tuesday the U.S. economy showed signs of shaking off recession, and predicted the country will return to budget surpluses.
Economic fundamentals are in place for a return to growth of between 3 percent and 3.5 percent toward year's end, O'Neill told a retail business group, delivering a forecast roughly in line with those of most Wall Street economists.
Other marquee high-technology companies have issued a mixed bag of earnings news since the close of trading on Tuesday.
Teradyne Inc. (NYSE:TER - news), the world's largest maker of semiconductor testing equipment, reported a fourth-quarter net loss in line with estimates, reversing a year-earlier profit, on sharply reduced sales to chipmakers suffering a prolonged downturn. Shares fell to $32.30 pre-open from $33.50 Tuesday.
EBay Inc. (NasdaqNM:EBAY - news), the Internet auction site, reported another period of robust growth and increased its guidance for the first half of 2002, saying the U.S. recession had not slowed its momentum.
But investors seemed worried the company could not sustain its strong track record forever, despite raised revenue forecasts for the first half of 2002, and started selling the stock late in the day. EBay shares, which had risen 87 cents to close Tuesday's regular trading session at $64.03, were trading around $60.65 after-hours following the release of earnings.
In overseas markets, chipmakers and semiconductor equipment suppliers continued to eat away at European share prices after Intel said it would slash capital spending in 2002.
Tokyo stocks ended mixed on Wednesday, with a slide in chip-equipment makers after a cut in capital spending by Intel offset by a rise in banks on hopes a rescue plan for Daiei Inc was close at hand. The tech-sensitive Nikkei lost 0.30 percent or 30.47 points to 10,177.58.
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