Wall Street falls on S&P's darker view on GE

NEW YORK (Reuters) - Stocks fell for the second day on Thursday after Standard & Poor's threatened to strip General Electric of its 'AAA' credit rating and slumping oil prices crippled energy stocks.

General Electric shares tumbled 6 percent to $16.30 and ranked among the top drags on the Dow industrials after S&P changed its outlook on the company and its finance arm to "negative." S&P said there is at least a 1-in-3 chance that it will cut its credit rating from the top "AAA" tier in the next two years.

Chevron Corp and Exxon Mobil were the biggest drags on the Dow for the second consecutive session. The major U.S. oil producers' stocks fell with the price of oil, which slid almost $4 to settle near $36 a barrel.

The Nasdaq showed the ill effects of a downgrade by brokerage Jefferies & Co of Intel Corp and other semiconductor stocks, which drove that sector lower.

Investors continue to assess the benefit of the Fed's record rate cut on Tuesday and a proposed stimulus package from President-elect Barack Obama.

"Traders look like they are still digesting all the things from the Fed announcement Tuesday and mentally still trying to figure out what a zero percent rate means," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co in Lake Oswego, Oregon.

The Dow Jones industrial average <.DJI> dropped 170.29 points, or 1.93 percent, to 8,654.05. The Standard & Poor's 500 Index <.SPX> slid 14.12 points, or 1.56 percent, to 890.30. The Nasdaq Composite Index <.IXIC> fell 22.15 points, or 1.40 percent, to 1,557.16.

Intel's stock lost 5.9 percent to $14.37 and ranked as the heaviest weight on the Nasdaq 100 <.NDX>. The semiconductor index <.SOXX> dropped 5.4 percent.

An S&P index of energy stocks <.GSPE> lost 4.1 percent. Chevron was down 3.8 percent at $73.93, while Exxon Mobil was down 3.5 percent at $78.26, both on the New York Stock Exchange.

Oil prices tumbled despite OPEC's approval of a record output cut on Wednesday. U.S. crude for January delivery fell $3.84 to settle at $36.22 a barrel.

The slowdown in the personal computer market, with declining sales of desktops and slowing sales of laptops, factored into Jefferies' downgrade of Intel's to "underperform" from "buy." The brokerage also slashed its price target on Intel to $11 from $26.

Jefferies downgraded Intel's smaller rival Advanced Micro Devices to "underperform" from "hold." The stock was flat at $2.29 on the NYSE.

Wireless chip maker Qualcomm lost 1.6 percent to $34.54. It was the second-heaviest weight on the Nasdaq 100.

Investor sentiment also was clouded by cautious corporate outlooks from a range of companies, including FedEx Corp and Ingersoll-Rand .

FedEx, considered an indicator of economic health, was down 1.1 percent at $63.24 on the NYSE after the package delivery company reported a rise in quarterly profit. However, the company said it would not provide an outlook for the third quarter of 2009 because of "significant economic uncertainty.

Ingersoll-Rand stumbled 2.7 percent to $15.90 after the diversified manufacturer cut its fourth-quarter and full-year 2009 revenue and earnings estimates, citing weakness in Europe.

Shares of ailing automaker General Motors dropped 12.6 percent to $3.82.

The White House said that it was nearing a conclusion on the bailout package that Detroit's Big Three automakers are seeking as they struggle to cope with slumping demand and weakening consumer spending.

Tempering investor worry was economic data, including a survey from the Federal Reserve Bank of Philadelphia that showed factory activity in the U.S. Mid-Atlantic region contracted in December, but at a less severe rate than the previous month.

(Editing by Jan Paschal)

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