US stocks down

US stocks sagged today in a bout of profit-taking, but blue chips fared better than they might have otherwise as shares of Dow Jones component Hewlett-Packard surged following the ousting of CEO Carly Fiorina.

The robust performance of HP shares gave the Dow Jones industrial average a bit of a lift, but it was not enough to keep the index in positive territory.

Oil prices were volatile as government inventory data showed lower-than-expected fuel supplies, and Treasuries rallied.

Analysts were not too alarmed by the day’s trading, however, saying some pullback in stocks was to be expected following the market’s advance last week.

“Oil is definitely factoring in … but let’s also take into account that the market has seen a nice little snap back during February after what can only be described as a dismal January,” said Bryan Piskorowski, market analyst at Wachovia Securities.

“To a certain extent, the market is using the oil figures as a reason to do some profit taking, and the dollar is lower, so that’s rolled together to pare some recent gains.”

The Dow fell 60.52, or 0.56%, to 10,664.11.

The broader gauges were also lower. The Standard & Poor’s 500 index declined 10.31, or 0.86%, to 1,191.99. The Nasdaq composite index skidded 34.13, or 1.64%, at 2,052.55.

Oil prices rebounded briefly after the government’s weekly inventory figures showed a surprising one million barrel drop in crude inventories; analysts had expected a build-up of 730,000 barrels.

Stores of distillate fuels, which include heating oil, also declined more steeply than expected.

By this afternoon, the rally fizzled, however. Crude futures settled up 6 cents at $45.46 a barrel on the New York Mercantile Exchange, after trading as low as 44.60 a barrel and as high as $46.40.

Meanwhile, the US dollar fell against other major currencies.

A run-up in Treasuries may also have worked against stocks, analysts said, noting that the yield on the 10-year note had slipped below 4% for the first time in more than three months, to 3.98%.

Some of the buying was linked to the government’s auction of $15bn (€11.7bn) in five-year notes, but bonds had already been moving higher, perhaps due to Atlanta Federal Reserve President Jack Guynn’s suggestion in an interview with The Wall Street Journal that the group might need to change its policy statement as it adjusts the pace of interest rate hikes.

“Why are we seeing strength in bonds here?

"It could be the bond market is anticipating a period of slower economic growth going forward, which could mean earnings estimates may be too optimistic, and need to be adjusted lower,” said Richard Cripps, chief market strategist for Legg Mason of Baltimore.

“It just raises more questions. It raises more uncertainty. It’s not what you would expect, with the Fed raising interest rates. I think that disconnect is troubling to some stock investors.”

Hewlett-Packard shares soared 6.9%, or $1.39, to $21.53, after the abrupt departure of Fiorina, who cited differences with the board over strategy as she tried to transform the company from a printer business to a broad-based technology giant.

The board named chief financial officer Robert Wayman as interim CEO.

Cisco Systems slipped 61 cents to $17.63; quarterly profits at the networking company, announced after the bell yesterday, matched expectations, but sales fell short and investors seemed less than impressed with a cautious outlook for the current quarter.

Insurance giant American International Group added $1.58 to $69.31 on an 11.5% rise in earnings as premium growth offset heavy storm losses and a settlement with federal regulators. Results were above analysts’ projections, and profits for the full year set a record, AIG said.

Advanced Micro Devices gained 30 cents to 17.94 after Morgan Stanley raised its rating on the chipmaker to “overweight” and set a 12-month price target of $25 on the stock.

The brokerage said it expects AMD to cut or reduce its exposure to the low-margin flash memory business, and to gain market share.

Decliners outnumbered advancing issues by about 2 to 1 on the New York Stock Exchange.

The Russell 2000 index, which tracks smaller company stocks, was down 13.01, or 2.04%, at 625.71.