A WARNING from tech giant Intel about poor business conditions and more evidence of rising unemployment left stocks with their biggest losses in a month yesterday.

The news upended some investors' hopes for a speedy economic recovery this year and sent the major stock indexes down more than 2.5 percent, including the Dow Jones industrials, which lost 245 points.

Intel's second warning since November, as well as bleak outlooks from aluminum producer Alcoa and media industry bellwether Time Warner, underscored the breadth of the economy's slowdown. In addition, the ADP National Employment Report said private sector jobs fell by a greater-than-expected 693,000 in December. That made investors nervous ahead of Friday's employment report from the government.

But unlike the panicked declines seen last fall, yesterday's pullback was more orderly and stocks finished off their lowest levels of the session. Some retrenchment had been expected following sharp gains in recent sessions and a 24.2 percent rally in the Standard & Poor's 500 index since Nov. 20 ahead of yesterday's slide.

"Nothing goes straight up or straight down," said Keith Springer, president of Capital Financial Advisory Services. "You do have some people who get skittish and start taking some profits, but I don't think the up trend has been broken here."

Wall Street has been absorbing poor economic and corporate news far better since late November, with some investors betting on a recovery in the second half of this year or by early 2010. But the latest round of unnerving news was too proved to be too much to set aside.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the market was simply reacting to the day's drubbing of bad news.

"One too many punches and the fighter finally went down," he said.

Chip maker Intel Corp said it now expects fourth-quarter revenue to drop a greater-than-expected 23 percent on a further weakening in demand from computer makers.

Other corporate news added to Wall Street's downbeat mood. Alcoa Inc warned late Tuesday it would slash its annual output by more than 18 percent and cut its global work force by 13 percent. And Time Warner Inc said yesterday it plans to book a US$25 billion impairment charge in the fourth quarter for its cable, publishing and AOL units.

Intel dropped 93 cents, or 6 percent, to US$14.44. Alcoa tumbled US$1.23, or 10 percent, to US$10.89, while Time Warner sank 69 cents, or 6.3 percent, to US$10.29.

Wall Street was already worried about what the Labor Department's report on employment would bring Friday. The government report is typically the most important economic reading each month because rising unemployment could endanger consumer spending, which accounts for more than two-thirds of U.S. economic activity. A month ago, investors shrugged off a rise in unemployment that was far bigger than Wall Street had expected.

The glum news sent the Dow down 245.40, or 2.72 percent, to 8,769.70, its biggest point and percentage decline since Dec. 1.

Broader stock indicators also tumbled. The S&P 500 index fell 28.05, or 3 percent, to 906.65. It was the biggest drop for the index since Dec. 1.

The Nasdaq composite index fell 53.32, or 3.23 percent, to 1,599.06, hit by the decline in Intel shares.

The Russell 2000 index of smaller companies fell 17.61, or 3.42 percent, to 497.10.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to a light 4.57 billion shares compared with 5.31 billion shares Tuesday. The light volume indicates there were simply fewer buyers on the bad news, unlike in September, October and November when bad news brought out waves of sellers.

Bond prices were mixed yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.50 percent from 2.47 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, fell to 0.11 percent from 0.14 percent.

The dollar fell against most other major currencies, while gold prices declined.

Light, sweet crude slumped 12 percent, falling US$5.95 to settle at US$42.63 a barrel on the New York Mercantile Exchange. The decline, which erased a week of gains, came after the government reported commercial crude oil inventories jumped well beyond the increase analysts expected. The weak economy has eroded demand.

The ADP report raised questions about whether government steps such as interest rate cuts and proposed spending on infrastructure will be sufficient to revive the economy.

"The market has shrugged off some bad news recently, and it's starting to get to the point where it can't do that anymore," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group.

Before the decline yesterday, the Dow had rallied about 20 percent from its multiyear lows in late November and the S&P 500 had risen 24.2 percent. Stocks looked past mixed economic readings Tuesday to move higher.

"We've had a big move," Fullman said. "What we're looking at now is just people getting a little cautious here."

The drop in oil weighed on the energy sector. Chevron Corp fell US$3.39, or 4.4 percent, to US$73.96, while Occidental Petroleum Corp fell US$3.53, or 5.7 percent, to US$58.11.

Technology stocks were among the biggest decliners after the Intel announcement. Microsoft Corp fell US$1.25, or 6 percent, to US$19.51, while Qualcomm Inc fell US$1.60, or 4.3 percent, to US$35.55.

Financial shares fell after Oppenheimer & Co analyst Meredith Whitney warned that banks could have to raise fresh capital in 2009 as they face continued deterioration of their balance sheets. JPMorgan Chase & Co fell US$1.79, or 6 percent, to US$28.09, while Morgan Stanley slid US$1.48, or 7.6 percent, to US$18.10.

The market's economic worries had been calmed a bit in recent days by President-elect Barack Obama's proposal to lower taxes and help businesses. But investors remain eager for more details of the stimulus package, which could cost as much as US$775 billion.

Overseas, Japan's Nikkei stock average rose 1.74 percent, and Hong Kong's Hang Seng index fell 3.37 percent. Britain's FTSE 100 fell 2.83 percent, Germany's DAX index fell 1.77 percent, and France's CAC-40 fell 1.48 percent.