Market Wrap: Stocks Drop on Caterpillar, Microsoft Earnings

NEW YORK — U.S. stocks closed more than 1 percent lower Tuesday as disappointing results from a number of bellwether companies pointed to weakening conditions, while an unexpected decline in durable goods orders also weighed on sentiment.

The day’s losses were broad, with nine of the 10 primary S&P 500 sectors lower on the day, though tech was the biggest drag by far. The group lost 3.3 percent in its biggest one-day drop since November 2011, in the wake of results from industry bellwether Microsoft. Industrial shares fell, led by Caterpillar.

The two names were the biggest decliners on the Dow, but fellow components Procter & Gable (PG) and DuPont (DD) also tumbled.

Microsoft (MSFT) fell 9.3 percent to $42.66 a day after the main engine of its historic earnings power — selling Windows and Office to big businesses — showed signs of waning.

Heavy machinery marker Caterpillar (CAT) gave an outlook below expectations, warning that the recent plunge in oil prices would hurt its energy equipment business. Shares dropped 7.2 percent to $79.85.

“There’s clearly a lot of froth baked into certain areas of tech, while Caterpillar is giving tangible evidence that things can go down more than they already have,” said Jim O’Donnell, chief investment officer at Forward in San Francisco.

“People may not be aware of the sensitivities that heavy industrial guys have to the oil cycle, or what the ripple effects of oil’s weakness will be. There are a lot of companies that are going to be adversely impacted.”

With 24 percent of the S&P 500 having reported, 70.6 percent of companies have topped earnings expectations while 55.5 percent have beaten on revenue, according to Thomson Reuters data. That compares with the long-term average of 63 percent for earnings and 61 percent for revenue.

Still, many multinational companies disappointed this quarter, with the stronger dollar a common culprit. P&G was one of the companies pressured by a stronger dollar, sending shares down 3.4 percent to $86.49.

After the market closed, Apple (AAPL) rose 5.4 percent to $115 after it posted better-than-expected revenue growth, along with record sales of its iPhone line.

AT&T’s revenue rose more than expected in the latest quarter. Yahoo reported its results and unveiled a plan for a tax-free spin-off of its 15 percent stake in China’s Alibaba Group Holding (BABA), a first step in a highly anticipated process to unwind the holding, valued at roughly $40 billion.

Shares of AT&T (T) rose 1.8 percent to $33.40 after the bell, while Yahoo (YHOO) added 7.7 percent to $51.69.

The Dow Jones industrial average (^DJI) fell 291.49 points, or 1.65 percent, to 17,387.21, the Standard & Poor’s 500 index (^GPSC) lost 27.54 points, or 1.34 percent, to 2,029.55 and the Nasdaq composite (^IXIC) dropped 90.27 points, or 1.89 percent, to 4,681.50.

Adding to the day’s weakness, a gauge of U.S. business investment plans unexpectedly fell in December, another sign that slowing global growth and falling crude oil prices were having an impact on the economy.

On the plus side, consumer confidence posted its highest reading since August 2007. That helped indexes recover from their lows of the session; the Dow earlier fell as much as 2.2 percent.

Declining issues outnumbered advancing ones on the NYSE by 1,726 to 1,337, for a 1.29-to-1 ratio; on the Nasdaq, 1,710 issues fell and 1,029 advanced, for a 1.66-to-1 ratio favoring decliners.

The S&P 500 posted 41 new 52-week highs and 10 new lows; the Nasdaq composite recorded 57 new highs and 49 new lows.

What to watch Wednesday:

• Federal Reserve policymakers meet to set interest rates and release statement at 2 p.m. Eastern time.

These selected companies are scheduled to release quarterly financial results:

• ADT (ADT)
• Ameriprise Financial Services (AMP)
• Anthem (ANTM)
• Biogen Idec (BIIB)
• Boeing (BA)
• Brinker International (EAT)
• Energizer Holdings (ENR)
• Facebook (FB)
• Fiat Chrysler (FCAU)
• General Dynamics (GD)
• Hess (HES)
• International Paper (IP)
• McCormick & Co. (MKC)
• Praxair (PX)
• Progressive (PGR)
• Qualcomm (QCOM)
• T. Rowe Price (TROW)
• Tupperware Brands (TUP)
• Vertex Pharmaceuticals (VRTX)

[source : dailyfinance.com]