Stocks fall on fresh evidence of economic woes

NEW YORK -- Stocks fell sharply today, as a handful of bleak profit outlooks and more evidence of escalating unemployment served as stark reminders that the economy remains in rough shape. The Dow Jones industrials dropped more than 175 points.

Underscoring investors' growing fears that 2009 is shaping up to be a difficult year for many sectors, Time Warner and Intel on Wednesday issued disappointing guidance.

Time Warner Inc. said it expects to record a fourth-quarter $25 billion impairment charge for its cable, publishing and AOL units that will lead to an operating loss for the period and a loss for the full year. It had expected a profit between $1.04 and $1.07 per share for the year.

Meanwhile, computer chip maker Intel Corp. said it expects fourth-quarter revenue to drop 23 percent, below prior estimates, due to weak demand and inventory reductions by its computer maker customers.

Time Warner shares shed 81 cents, or 7.4 percent, to $10.17. Intel shares fell 57 cents, or 3.7 percent, to $14.80.

Aluminum producer Alcoa Inc.'s decision to slash jobs further jolted investors.

Alcoa said late Tuesday it is reducing its global work force by about 13,500, or 13 percent, by the end of the year and lowering total output by more than 18 percent annually. Shares of Pittsburgh-based Alcoa tumbled 93 cents, or 7.7 percent, to $11.19.

The announcement comes ahead of the Labor Department's report Friday on the job market -- a closely watched barometer of the economy's health. The market got a disappointing harbinger Wednesday in the form of the ADP National Employment Report, an unofficial gauge that the market has been increasingly monitoring as U.S. job losses mount. The report said private sector employment fell by 693,000 in December, worse than expected.

When people lose their jobs, they tend to spend less and fall behind on their debt payments. Investors fear that further declines in consumer spending will prolong the recession.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the market is reeling from a drubbing of bad news, particularly the ADP employment report.

"One too many punches and the fighter finally went down," he said, referring to the run-up in stocks in late 2008 and this year.

The ADP report is making investors question whether any government effort to revive the economy will be sufficient, he said.