HP's earnings warning puts dent in market

Updated: 11:32 p.m. ET

Stocks ended the day higher, but what had been a solid rally faded substantially as an earnings warning from Hewlett-Packard (HPQ) and disappointment with the terms of a cellphone merger dismayed investors.

Decent reports on the jobs market and the non-manufacturing economy had led the market to an early surge, along with a report showing an upswing in mortgage applications as borrowers sought to take advantage of low rates.

Futures trading suggests a solid rally on Thursday. Part of that gain may be some investor reaction to Mitt Romney's performance in tonight's debate with President Barack Obama. Earlier in the evening, futures had signaled a flat open.

Initial reactions were that Romney had the better night. On Intrade.com, trading by speculators on the outcome of the election, sold down Obama's odds to 67.7% from 74.5% on Tuesday and nearly 79% on Saturday.

The Dow Jones industrials ($INDU) closed up 12 points to 13,495; the blue chips had been up as many as 54 points. Still, the gain was a rebound from Monday's decline of 33 points. The Standard & Poor's 500 Index ($INX) was up 5 points to 1,451. And the Nasdaq Composite Index ($COMPX) gained 15 points to 3,135.

Article continues below.The Nasdaq-100 Index ($NDX) gained 20 points to 2,819. Apple (AAPL), whose rebound late Tuesday pushed the index into the black on the day, was up $10.14 to $671.45. The gain was fueled by speculation the company will introduce a 7-inch version of its iPad tablet by Halloween.

Google (GOOG) was up $5.51 to $762.50, not far from its all-time intraday high of $765.99.

Microsoft (MSFT) and Amazon.com (AMZN) were also higher. (Microsoft publishes MSN Money.)

The difficult story at Hewlett-Packard
Hewlett-Packard fell $2.22 to $14.91, its lowest close since November 2002. CEO Meg Whitman warned at an investor conference in San Francisco that fiscal 2013 will be a "fix-and-rebuild year" and cut the company's earnings guidance well below Street estimates.

HP expects revenue in its fiscal year beginning Nov. 1 to fall in each of its largest businesses and forecasted a big drop in profits, excluding one-time charges. It reported $127 billion in revenue in its 2011 fiscal year.

"The single biggest challenge facing Hewlett-Packard has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices, and frankly some significant executional miscues," Whitman told the audience. "This is important because, as a result, it is going to take longer to right this ship than any of us would like."

HP's decline subtracted nearly 17 points from the Dow. The stock is down about 50% from its February high and 79.8% from its closing peak of $74.06, set on April 6, 2000.

T-Mobile and MetroPCS to merge
Also not helping matters was the announcement that T-Mobile, the U.S. arm of Deutsche Telekom (DTGEY), will merge with MetroPCS (PCS), creating the fourth-largest cellphone carrier. MetroPCS shareholders will get $1.5 billion in cash and stock in what will be a new company.

But investors pushed MetroPCS shares down $1.33 to $12.24 because they'd hoped T-Mobile would simply gobble up MetroPCS.

3M, Avery Dennison cancel a deal; Applied Materials announces job cuts
After the close, 3M (MMM) said it had terminated its $550 million agreement to buy Avery Dennison's (AVY) office-products business. The deal fell apart because the Justice Department had opposed the deal on antitrust grounds.

The Justice Department’s investigation found that 3M and Avery have dominated adjacent parts of the office products business for many years, with Avery making labels and 3M selling sticky notes under its Post-it brand, Bloomberg News noted.

Marriott International (MAR) shares were up 1.9% to $39.72 after hours, despite trimming back its earning guidance. The big hotel operator reported a higher-than-expected​ quarterly profit after the close as its corporate business showed strength. The shares were up 37 cents to $39 in regular trading.

Shares of chip-equipment-maker​ Applied Materials (AMAT) were unchanged at $11.16 after hours. The company will cut 900 to 1,300 workers. The move was prompted by lackluster personal-computer demand that has led customers to slow orders for manufacturing tools.

Futures trading suggests stocks open slightly on Thursday. The Presidential debate tonight may move markets, however.

The day includes minutes from the September Federal Reserve meeting and the weekly report on jobless claims. The banks of Japan and England and the European Central Bank will announce policy decisions.

The market is stuck
The Dow's gain was part of a pattern of alternating down-and-up days over the past six sessions. But the S&P 500 has risen for three days in a row. The Nasdaq's gain was its second in a row.

But the major averages appear stuck in trading ranges. The Dow has traded between 13,000 and 13,600 since July 27. The S&P 500 has traded between 1,400 and 1,460 since Aug. 7, and the Nasdaq's range has been 3,000 to 3,200 since Aug. 7.

While there is some frustration about the major averages, the Dow Jones Transportation Average ($DJT) was up 58 points to 4,966. United Continental Holdings (UAL), Delta Air Lines (DAL) and Jet Blue Airways (JBLU) were the leaders, thanks to lower oil prices and possibly the sense the economy is not falling apart.

Energy prices -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Crude oil (-CL)			$88.14			$91.89			-4.39%			-10.82%
(per barrel)
Heating oil (-HO)			$3.0664			$3.1255			-2.94%			5.22%
(per gallon)
Natural gas (-NG)			$3.3950			$3.5310			2.26%			13.58%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.7995			$2.8692			-4.13%			5.35%
(per gallon)
Brent crude			$108.17			$111.57			-3.75%			0.74%
(per barrel)
Retail gasoline			$3.7820			$3.7800			-0.13%			15.45%
(per gallon; AAA)

Crude oil falls nearly to $88
The market's gains came as a rising dollar pushed energy prices and energy stocks lower. Light sweet crude oil (-CL) settled down $3.75 to $88.14 a barrel, its lowest close since Aug. 2. Brent crude was trading at $107.89 a barrel, down $3.68.

The national average retail price of gasoline was $3.782 a gallon, up slightly from Tuesday's $3.78 a gallon, according to AAA's Daily Fuel Gauge Report.

Chevron (CVX) was the second-worst Dow performer, falling $1.82 to $116.14. Exxon Mobil (XOM) fell slightly to $91.70.

A big exception to the trend was Murphy Oil (MUR), up $2.31 to $58.21 on news that hedge-fund manager Daniel Loeb has built a sizable position in the stock and wants to expand. According to CNBC's Kate Kelly, he argues Murphy has a cumbersome business and would do well to sell such operations as its gas stations, refining operation in the United Kingdom and natural gas assets in Canada.

Gold (-GC) settled up $4.20 to $1,779.80 an ounce in New York, and silver (-SI) rose 2.1 cents to $34.69 an ounce.

The 10-year Treasury yield was up slightly to 1.623% from Tuesday's 1.615%.

ADP reports jobs growth -- with a catch
The ADP National Employment report estimated that private-sector employers added 162,000 jobs in September, more than the expected 140,000. There was a downside: ADP trimmed its estimates for job growth in July and August.

The ADP report is widely watched as a hint of what to expect from Friday's big jobs report from the Labor Department. Analysts expect overall growth of around 100,000 with the unemployment rate holding at 8.1% or possibly rising.

At the same time, the Institute for Supply Management's non-manufacturing index came in at 55.1%, better than expected, thanks to gains in new orders. As with the ADP report, the index showed a slippage in employment growth.

Stocks ended mixed across Europe and Asia earlier today. Chinese services industries expanded at the weakest pace since at least March 2011 in September. At the same time, Bloomberg News noted, eurozone services and manufacturing output contracted for the eighth straight month.

Housing leads the market
The market was helped by a big surge in mortgage applications, for both purchases of homes and refinancings, as borrowers sought to take advantage of the Federal Reserve's vow to keep rates at "exceptionally low levels" until at least 2015.

Homebuilding shares were the leading group in the market. Lennar (LEN), up $2.42 to $37.41, and D.R. Horton (DHI), up $1.28 to $21.99, were the second- and third-best S&P 500 performers. PulteGroup (PHM), up 94 cents to $16.50, was fifth. Ryland (RYL) added $1.67 to $31.48.

Best Buy (BBY) rose 79 cents to $17.76 after Reuters reported the consumer electronics retailer's founder and at least four other private-equity firms are examining the company's books, which could lead to a buyout proposal. The gain was the sixth-best among S&P 500 stocks.

Some trades in Kraft Foods Group (KRFT), which is listed on the Nasdaq stock market, were ruled "clearly erroneous" and canceled. The shares closed down 55 cents to $44.87. The busted trades, in the first minute of the session, would have put the stock more than $12 higher from its latest price. Kraft Foods Group is the grocery business of Kraft Foods, which has split itself in two. The other business is Mondelez International (MDLZ), whose brands include Oreo cookies and Cadbury chocolate. Its shares were down 18 cents to $27.83.

Netflix (NFLX) was the top S&P 500 and Nasdaq-100 performer, climbing $6.12 to $62.58 after Citigroup analysts reiterated their recommendation to buy the shares.

Family Dollar Stores (FDO) rose $2.56 to $68.56 after the discount retailer reported fiscal-fourth-quarte​r earnings and revenue that were in line with estimates, and provided a somewhat upbeat earnings outlook for fiscal 2013.

Twenty-one Dow stocks were higher on the day, led by Home Depot (HD), a beneficiary of the hopes for housing. And 303 S&P 500 stocks were ahead, along with 60 Nasdaq-100 stocks.

Short hits from the markets -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.0900%			0.090%			0.00%			800.00%
5-year Treasury note			0.604%			0.614%			-4.13%			-27.23%
10-year Treasury note			1.623%			1.615%			-0.86%			-13.25%
30-year Treasury bond			3.032%			3.032%			0.00%			4.95%
Currencies
U.S. Dollar Index			80.064			79.830			0.05%			-0.57%
British pound			1.6103			1.6137			-0.35%			3.64%
(in U.S. $)
U.S. $ in pounds			£0.621			£0.620			0.36%			-3.51%
Euro in dollars			$1.29			$1.29			0.52%			-0.28%
(in U.S. $)
U.S. $ in euros			€ 0.774			€ 0.774			-0.51%			0.29%
U.S. $ in yen			78.62			78.18			0.83%			1.97%
U.S. $ in Chinese			6.35			6.32			1.03%			0.31%
yuan
Canada dollar			$1.014			$1.017			-0.29%			3.33%
(in U.S. $)
U.S. dollar			$0.987			$0.984			0.37%			-3.23%
(in Canadian $)
Commodities
Gold (-GC)			$1,779.80			$1,775.60			0.33%			13.59%
(per troy ounce)
Copper (-HG)			$3.784			$3.801			0.69%			10.13%
(per pound)
Silver (-SI)			$34.6900			$34.6690			0.33%			24.27%
(per troy ounce)
Wheat (-ZW)			$8.7300			$8.7150			-3.27%			33.74%
(per bushel)
Corn (-ZC)			$7.5675			$7.583			0.07%			17.05%
(per bushel)
Cotton			$0.7216			0.7185			2.14%			-21.29%
(per pound)
Coffee			$1.8105			1.8365			4.35%			-21.16%
(per pound)
Crude oil (-CL)			$88.14			$91.89			-4.39%			-10.82%
(per barrel)