U.S. MARKET AVERAGES

U.S. stocks traded weak at opening after disappointing quarterly earnings released by major tech companies like Intel and Yahoo, raising worries about corporate earnings, spurt large-scale sell-off. Investors also worried about the heavy slump of the Japanese Nikkei, down 3% and other global markets. Meanwhile, oil prices extended their climb past $66 a barrel.

Dow component Intel Corp., the world''s top chipmaker, reported Q4 results below expectations on weak demand for the processors used in desktop computers. Piper Jaffray downgraded its rating on Intel and cut its price target. Yahoo Inc., the world''s largest Internet media company, also posted quarterly earnings that fell short of Wall Street expectations.

International Business Machines Corp., the world''s biggest computer company, said quarterly profit rose higher than expected.

Yet most of the U.S. market''s losses could be blamed almost entirely on tech-sector selling, with other stocks generally holding firm after the Labor Department reported better-than-expected retail inflation data.

The Internet sector was the most conspicuous decliner in the tech sector, after Yahoo! (YHOO: chart) slipped nearly 12% on its disappointing quarterly results. Google (GOOG: chart)dropped by about 3.5%after it was downgraded by analists. eBay (EBAY: chart) fell less than 1% ahead of its earnings release, due out after the close of trading.

A number of other tech sectors posted significant weakness in early trading with the networking and disk drive sectors being two of the worst performers. The semiconductor sector, dragged by Q4 profit drop of 10% in Intel (INTC: chart) also moved notably to the downside.

In the first hour of trading, the tech-focused Nasdaq composite index fell 35.46, or 1.54%. The Dow Jones industrial average dropped 39.70, or 0.36%, and the Standard & Poor''s 500 index lost 5.90, or 0.46%.

Bonds rose as stocks fell, with the yield on the 10-year Treasury note falling to 4.31% from 4.33% late Tuesday.

MOVERS AND SHAKERS

Southwest Airline (LUV: chart) reported Q4 net income jump of 53.6% to $86 million or 10 cents a share, below estimates of 13 cents a share. Operating revenue for the quarter rose 20.1% to $1.99 billion. The company said it sees a favorable outlook for the first quarter of 2006 and expects January's load factor and unit revenues to rise. The company’s shares rose 4.9%.

AMR Corp. (AMR: chart) posted a wider Q4 loss of $604 million, or $3.49 a share from a loss of $387 million, or $2.40 a share a year ago, below estimates for a loss of $2.55 a share. Excluding items, the company lost $413 million, or $2.39 a share, in the quarter. Revenue rose 13.8% in the latest three months to $5.17 billion from $4.54 billion in the same period a year earlier. The stock gained 1.9%.

Applied Industrial Technologies (AIT: chart) reported Q2 income rise of $15.3 million, or 50 cents a share, from $10 million, or 33 cents a share in the year ago period, beating estimates for 47 cents a share. Sales grew by 13% to $456.2 million. For Q3, the company projected earnings of 53 to 58 cents a share on sales of $483 million to $493 million. For fiscal 2006 it forecast earnings of $2.10 to $2.20 a share on sales of $1.86 billion to $1.89 billion. Company’s shares jumped 4%.

ECONOMIC NEWS

Consumer prices unexpectedly showed a modest decline in December, according to a report from the Department of Labor. The drop in prices was largely due to a continued decrease in energy prices.

The Labor Dept. said that its consumer price index fell 0.1 percent in December following a 0.6 percent decrease in November. Economists had been expecting prices to increase by about 0.1 percent.

The decrease in prices was due in large part to a 2.2 percent drop in energy prices, which continued lower after falling 8.0 percent in November. Prices for transportation and apparel also fell in December.

The core CPI, which excludes food and energy prices, rose 0.2 percent in December, matching the increase seen in the two previous months. The modest increase came in line with economist estimates.

The report also showed that the CPI rose 3.4 percent for the 12 months ended in December compared to a 3.3 percent increase in 2004. At the same time, the core CPI rose 2.2 for 2005, unchanged from the previous year.

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