HP drags down Dow Jones industrial average

May 17, 2011 - 2:30 PM
Wall Street

In this May 16, 2011 photo, broker Andrew M. Silverman works his post on the trading floor of the New York Stock Exchange. Renewed concerns about Europe's debt, falling oil prices and U.S. technology company troubles weighed on world stock markets Tuesday, May 17. (AP Photo/David Karp)

NEW YORK (AP) — Tech giant Hewlett Packard dragged the Dow Jones industrial average lower on Tuesday. Worries over the economic growth also weighed on stocks and drove bond yields to their lowest levels this year.

Hewlett Packard Co., the world's largest technology company by revenue, lowered its earnings outlook for the rest of the year. The company expects weaker sales of personal computers. HP's stock fell 9 percent, more than any other company in the Dow average.

Economic reports also raised concerns about the economy's strength. The Federal Reserve said U.S. factories produced fewer goods in April for the first time in 10 months. The Commerce Department said new home building plunged. Apartment construction plummeted more than 28 percent.

The two reports drove traders into U.S. government bonds, pushing yields to their lowest level this year. The yield on the 10-year Treasury note sank to 3.10 percent. When bond prices rise, their yields fall.

"There's a high degree of caution right now," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "People are worried about big picture issues that need to be resolved."

In early afternoon trading, the Dow is down 105 points, or 0.8 percent, to 12,443. The Standard & Poor's 500 index is down 6 points, or 0.4 percent, to 1,324. The Nasdaq composite is down 13 points, or 0.5 percent, to 2,769.

Home Depot Inc. and Wal-Mart Stores Inc., two other Dow members, also reported results Tuesday. Wal-Mart said its income rose 3 percent in the first quarter, but sales at stores open at least a year fell for the eighth quarter in a row. Wal-Mart's stock fell 1 percent.

It was a similar story at Home Depot. Sales also slipped in the first quarter but income jumped 12 percent, beating analysts' expectations. Home Depot rose 1 percent.

Even with a majority of companies reporting stronger earnings, the U.S. stock market has lost some of its momentum in the last few weeks. Concerns are growing that high gas prices will weigh on the economy, pinch consumer spending and cut into corporate profits.

The three major stock indexes are down more than 3 percent this month after a strong start to the year. The Dow remains up 7 percent for the year, and the S&P 500 is up 5 percent.