U.S. MARKET AVERAGES

Stock markets opened in the negative just as futures had predicted. The averages dropped on disappointing earnings and sales outlook report from Intel. The microprocessor maker’s earnings missed expectations by a penny per share and warned of slow sales in the fourth quarter. The news led the investors to conclude that consumer spending, which represents 70% of the economy, is slowing down.

The disappointment over Intel’s report was mitigated by strong earnings from the tech and other sectors. JP Morgan Chase & Co. (JPM: chart), the third-largest U.S. bank, reported that its quarterly earnings rose and its revenue topped Wall Street forecasts. Another upbeat report came from Motorola Inc. (MOT: chart) which posted a third-quarter earnings rise on strong sales of its mobile phones, beating Wall Street estimates.

Concern over inflation and consumer spending drew investors' attention away from some positive economic news. The Commerce Department said new housing construction rose 3.4% to an annualized rate of 2.108 million units, far greater than the 1.975 million economists expected.

The semiconductor sector is among the most notable decliners, down 32.7% dragged down by disappointing Intel's (INTC: chart) earnings and outlook. The Dow component is currently down 3.6%. Other stocks posting losses over 3.5% are Micron (MU: chart), National Semiconductor (NSM: chart) and Novellus Systems (NVLS: chart). The semiconductor space has moved below its 200-day moving average for the first time since May.

The housing sector is another conspicuous decliner, despite a sharp rise in September housing starts and an increase in the Mortgage Bankers Association's weekly index of mortgage loan application activity. Ryland (RYL: chart) posted strong earnings and raised guidance, but received a downgrade from Banc of America and is now lower by more than 2.5%.

Treasury yields are lower after an hour of trading in the fixed income market, but they generally remain within their ranges of the last week. The 10-year yield is currently trading at 4.445%, down 3.6 basis points on the day.

MOVERS AND SHAKERS

Dwo component Intel Corp (INTC: chart) reported solid third-quarter earnings, but provided an outlook for fourth-quarter revenue where the mid-point of the range was slightly below analyst expectations. The company said net income for the period ended October 1 rose to $2 billion, or 32 cents a share, up from $1.9 billion, or 30 cents, a year ago. Intel is expected to be under pressure today.

Another Dow component, J.P. Morgan (JPM: chart), reported an increase of 78% in adjusted earnings. The company also said that Jamie Dimon will take over as the company’s chief executive officer six months earlier. The investmant bank’s shares added 2%.

Honeywell International Inc. (HON: chart) posted quarterly revenue that fell slightly of Wall Street forecast. The company’s stock lost 1.2% yesterday and is expected to go down today.

Yahoo Inc. (YHOO: chart) reported a growth in revenue from online advertising and Internet services that helped the company to compensate a quarterly profit that was nearly unchanged from a year ago. Yahoo posted $254 million, or 17 cents a share, for the period ended September 30. The company’s stock gained 1.7%.

Motorola Inc. (MOT: chart) posted earnings that went ahead of expectations, boosted by higher handset sales, a one-time tax benefit and the sale of stock in Nextel Communications. The company reported a net profit of $1.75 billion, or 69 cents a share, up from $479 million, or 20 cents, a year ago. Motorola’s shares gain 2%.

ECONOMIC NEWS

Crude oil inventories advanced sharply in the latest week, according to government data released Wednesday, adding to the more moderate gain recorded during the previous period. Stocks of gasoline advanced as well.

The Department of Energy's Energy Information Administration revealed that crude oil inventories climbed by 5.6 million barrels for the week ended October 14, rising to 312.0 million barrels from the 306.4 million barrels recorded in the previous week. This followed an advance of 1 million barrels for the prior week. Oil inventories are now 11.9% higher than their levels of the same time last year.

Gasoline inventories posted a week-over-week advance of 2.9 million barrels, the government said, more than reversing the previous week's decline of 2.7 million barrels. Gasoline stocks are now 4.2% below their levels of last year. Inventories of distillate fuel oil fell by 1.9 million barrels in the most recent week.

Wednesday morning, the Department of Commerce released its report on housing starts and building permits in the month of September. The report showed that housing starts and building permits both rose unexpectedly.

The report showed that housing starts rose 3.4 percent to a seasonally adjusted annual rate of 2.108 million units in September from a revised 2.038 million unit rate in August. Economists had expected housing starts to fall to a 1.950 million unit rate from the 2.009 million unit rate originally reported for August.

The unexpected increase in housing starts reflected strong growth in the South, where housing starts rose by 6.9 percent. Housing starts rose by 1.9 percent in the Midwest while coming in unchanged in the Northeast and West.

The Commerce Dept. also said that building permits rose 2.4 percent to a seasonally adjusted annual rate of 2.189 million units in September from a 2.138 million unit rate in August. The increase came as a surprise to economists, who had expected building permits to fall to a 2.075 million unit rate.