Google, Palm Hit In Late Sell-off

Stocks had a relatively uneventful day on Tuesday, but Google (NASDAQ: GOOG) and Palm (NASDAQ: PALM) threaten to make Wednesday another tough day for the stock market.

Google shares lost more than 3% in after-hours trading after CEO Eric Schmidt was quoted by news services as telling the Morgan Stanley Technology Conference that the economy won’t recover until 2010 and that Google is “not immune” to the recession’s effects.

And Palm shares fell more than 10% after hours after the company said its February quarter sales will come in far below estimates, citing Treo Pro delays and a “difficult transition period” before the launch of the Palm Pre. Palm’s forecast of $85-$90 million in quarterly sales is about $70 million below the Thomson Reuters forecast.

Palm said it burned through $95-$100 million in the quarter and has $215-$220 million in cash on hand.

Stocks stabilized somewhat during the day following Monday’s steep losses, but it wasn’t enough to keep the S&P 500 from closing below 700 for the first time since October 1996.

Microsoft (NASDAQ: MSFT) ended the day 0.6% higher on an Oppenheimer upgrade on optimism ahead of the Windows 7 release.

Tech Data (NASDAQ: TECD) and Xilinx (NASDAQ: XLNX) surged on better than expected earnings.

Dell (NASDAQ: DELL) jumped 8% on plans to outsource more manufacturing.

Apple (NASDAQ: AAPL) edged higher on news of new Macs.

AMD (NYSE: AMD) gained 3% after spinning off its manufacturing facilities.

Qualcomm (NASDAQ: QCOM) climbed 2% after hiking its dividend at a time when financial companies are slashing their payouts.

Nvidia (NASDAQ: NVDA), Research in Motion (NASDAQ: RIMM) and Sun (NASDAQ: JAVA) were other gainers.

The Nasdaq lost 1 to 1321, the S&P 500 fell 4 to 696, and the Dow lost 37 to 6726. Volume declined to 8.63 billion shares on the NYSE, but rose to 2.44 billion on the Nasdaq. Decliners led by a 25-13 margin on the NYSE, and 17-10 on the Nasdaq. Downside volume was 53% on the NYSE, and 57% on the Nasdaq. New highs-new lows were 12-937 on the NYSE, and 3-580 on the Nasdaq.