Today: While the Dow gains to set a second consecutive record closing price, Apple (AAPL) and other tech stocks decline. Also: SolarCity's first earnings report as a public company shows much larger losses than expected, and Microsoft owes big money to the EU.
Dow continues to set records, but Apple and Google hold back tech stocks
The Dow's record-breaking rally kept going Wednesday on the strength of more positive news on the U.S. economy, but Apple's volatility continued with a drop that helped send tech stocks down on the day.
One day after establishing a record closing high, the Dow Jones industrial average climbed another 0.3 percent to set a new all-time high, as investors were cheered by a private reading of payroll records that showed employers added 198,000 jobs in February, more than the 152,000 economists expected the federal government to announce in Friday's jobs report.
While some expected a pullback after the record levels seen Tuesday, experts said that continuing strong reports on the economy will prevent such an occurrence, as belief that the U.S. economy is on the right track is the main factor behind Wall Street's resurgence.
"When you reach a record high, it triggers introspection about whether we're overvalued, but I don't expect a pullback because the reasons we've climbed are still in place," David Joy, chief market strategist at Ameriprise Financial, told Reuters. "The market has the opportunity to move higher until there's evidence those factors will die out."
While the Dow set another record, the other two main U.S. stock indexes trailed, with Apple's inability to sustain positive momentum a large factor. The Cupertino tech giant fell 1.3 percent to $425.66 Wednesday, pulling its market capitalization lower than $400 billion and handing the title of most valuable U.S. company back to Exxon Mobil -- the third consecutive day that the two companies have switched spots on the list.
While Apple stock has plunged more than 35 percent from highs seen in 2012, analysts have continued to support it, with price targets averaging more than $600 for the stock, even as it struggles to touch $450 a share. That support seemed to crack on Wednesday, however, as Citigroup and Barclay's lowered their price targets for Apple and expressed concerns that the reigning champ of consumer devices may soon lose that title as well.
Citi, which already had a lower-than-consensus price target of $500, dropped it even further to $480 and used the words that most scare Apple investors: "reduced demand."
"Indications of reduced demand to Apple's suppliers contribute to our existing concerns that end demand for 10-inch iPad and iPhone 5 in particular is softening, reflecting share loss by Apple in both the tablet market and the smartphone market," the investment bank's trio of Apple analysts wrote, mirroring earlier reports of lessening demand for Apple products that contributed to earlier Apple stock weakness.
Barclay's dropped its price target from $575 to $530, expressing optimism nonetheless, and Merrill Lynch analyst Scott Craig maintained his price target but reported that search volume for the iPhone is dipping at a worrisome amount.
Not all the news Wednesday was bad for Apple, however: the company still has the highest share of the U.S. smartphone market, according to a ComScore report, and actually had a larger lead on Samsung than in previous quarter's report. CEO Tim Cook also has met with the leader of Beats Electronics to discuss a streaming-music service, according to a Reuters report, which Apple could use to boost iTunes.
Google (GOOG), which had been booming as Apple waned, dropped as well Wednesday, despite a Bloomberg investigation that showed a valuation gap between Apple and Google that should make the latter even more attractive to investors, with the added bonus that Google has its fingers in so many more pies than Apple.
"There's only one company benefiting from all the growth areas of the Internet -- be it video, mobile, local, social, display advertising," B. Riley analyst Sameet Sinha told Bloomberg News, speaking of Google. "Apple has just done well in devices, nothing else."
Google dropped 0.8 percent to $831.38.
Some large-cap Silicon Valley companies did gain Wednesday, with the two area firms that are included in the Dow among the strongest performers. Cisco (CSCO) gained 2.3 percent for the second straight day, and Hewlett-Packard (HPQ) increased 2.8 percent as reports suggested it was looking into the price necessary to purchase rival Dell. Intel (INTC) and Oracle (ORCL) also gained, adding 1.1 percent apiece, helping the SV150 index and Nasdaq avoid a large negative swing with Apple and Google losses.
SolarCity stock plunges in late trading following disappointing earnings report
One of Silicon Valley's newest entrants to the market was pounded by investors after its first earnings report as a public company Wednesday, as San Mateo's SolarCity announced that its losses in the last three months of 2012 were more than double what analysts expected.
The solar installer reported losses of $1.10 a share on revenues of $25.3 million, far below average expectations of 49 cents a share on revenues of $36.7 million, according to Thomson Reuters.
The company has found many willing investors since its December initial public offering, with shares rising heartily from the $8 IPO price in the first day of public trading and continuing to steadily rise through Wednesday's session, when the stock closed with a gain of 3.9 percent at $19.27. However, shares plunged more than 9 percent in after-hours trading following the earnings report's release Wednesday, trading closer to $17.50.
The unhappy news for the solar sector came on the heels of a strong trading day, as a Raymond James upgraded the top two solar manufacturers in the United States, First Solar and San Jose's SunPower (SPWRA). Those two stocks gained 3.2 percent and 1.8 percent respectively as analysts said the risk-reward imbalance previously seen in the sector was easing.
Microsoft penalized for breaking antitrust pact with European Union
Microsoft was a trailblazer Wednesday, but not in a good way -- the software giant became the first company found to break a settlement agreement with the European Union, and will pay for it.
The EU found that the Washington company failed to live up to its end of a pact on the Internet Explorer Web browser, the focus of antitrust charges against the company that led to a 2009 deal. Microsoft was supposed to ensure that consumers who purchased a Windows operating system were presented with a choice on Web browsers, which it failed to do in millions of Windows 7 installations.
The penalty: $733 million, which many observers called excessive. Keith Hylton, a professor of law at Boston University, told AP the fine was "far in excess of any benefit Microsoft could have gotten from the error, and vastly in excess of any harm to EU consumers, who are all aware of alternatives to Internet Explorer."
Microsoft stock fell 0.9 percent Wednesday to close at $28.09.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 1.76, or 0.05 percent, to 3,222.37
The blue chip Dow Jones industrial average: Up 42.47, or 0.3 percent, to 14,296.24
And the widely watched Standard & Poor's 500 index: Up 1.67, or 0.11 percent, to 1,541.46
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.