North American markets are expected to open lower today as investors consider Intel’s disappointing 2004 outlook and react to unexpectedly weak U.S. retail sales.

Intel reported a doubling of quarterly profits after U.S. markets closed Tuesday. However, the company’s stock declined in after-hours trading. Analysts cited higher inventory levels and Intel’s forecast of lower profit margins as concerns for the technology bellwether.

In other business news, Japan’s UFJ said it is in talks with Mitsubishi Tokyo about a merger. A deal would create a banking group with US$1.8 trillion in assets, surpassing Citigroup as the world’s biggest bank. It also would leave Japan’s banking industry dominated by just three financial groups.

In this morning’s economic news, U.S. retail sales reversed course in June, taking a surprisingly sharp drop as the auto sector showed considerable weakness.

Retail sales decreased 1.1% in their largest fall in 16 months, the Commerce Department said today. Sales in May rose 1.4%, revised up from a previously reported 1.2% gain.

A 4.3% drop in auto demand helped drive overall June sales lower. Without the auto component, retail sales would have gone down just 0.2%.

Economists forecast a 0.7% decline for June with sales up 0.2% if auto sales were excluded.

Meanwhile, prices of goods imported to the U.S. fell for the first time in nine months as the value of the U.S. dollar climbed.

Overall import prices fell 0.2% in June after a 1.4% gain in May, the Labor Department said Wednesday. The decline partly reflected a drop in fuel prices. But the strength of the U.S. dollar caused prices of imported capital goods to decline, the department said.

There are no major economic releases from Statistics Canada today.

In today’s earnings, news, Bank of America reported a 41% rise in net income for the second quarter, driven by the bank’s merger with FleetBoston Financial. Revenue rose 35%.

Stocks plunged in Asia overnight as worries about profit margins at Intel sent a chill through the region’s high-tech industry.

The Japanese Nikkei fell 251.97 points, or 2.17%, closing at 11,365.65.

In Hong Kong, shares also took a beating. The Hang Seng fell 145.50 points, or 1.2%, to 11,932.83.

Technology stocks played a key role in the markets Tuesday, pushing Bay Street into positive territory, but leaving Wall Street in an uncertain mode.

The S&P/TSX composite index added 30.37 points to 8,452.60. Technology stocks jumped 3.9%

The TSX was dominated by the performane of Nortel Networks Corp. Its shares climbed 10% with more than 47.9 million shares trading hands — more than a quarter of the exchange’s volume Tuesday — after the company said it needs to put an “improved cost structure” in place to “drive financial performance.” Nortel also intends to “dedicate significant resources to the process to complete their financial statements as soon as practicable.”

The junior S&P/TSX Venture composite index fell 17.59 points , or 1.12%, to close at 1,559.45.

On Wall Street, the Dow Jones industrial average rose just 9.37 points to 10,247.59. The S&P 500 gained 0.79 of a point to 1,115.13. The tech-heavy Nasdaq composite index lost 5.26 points to finish at 1,931.66.