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Stocks decline after rally amid mixed earnings

Stocks decline after rally amid mixed earnings

Stocks decline after rally amid mixed earnings

Traders work on the floor of the New ...


    NEW YORK — Wall Street pulled back Tuesday as investors decided to cash in some of the previous session’s big gains as they warily comb through another batch of quarterly earnings. The Dow Jones industrial average fell 250 points.
    The retreat was to be expected after the Dow Jones industrial average shot up 413 points on Monday. But investors were also poring over third-quarter earnings reports expected for signs of how serious the economic downturn is; companies’ outlooks for the fourth quarter and beyond were under particular scrutiny.
    Results released Tuesday were mixed. DuPont Co. said it is lowering its 2008 forecast, Caterpillar Inc. earnings slipped amid higher raw material costs, and Pfizer Inc. topped estimates.
    Still, investor anxiety appears to have lessened considerably compared to the previous two weeks when fears about tightening world credit and the health of the economy battered stocks across the globe.
    And analysts have warned that the market will see a stretch of volatile sessions as Wall Street recovers from this month’s huge drop.
    ‘‘It’s just this back-and-filling stuff. It’s driven by earnings, yes, but also emotion,’’ said Harry Clark, chief executive of Clark Capital Management in Philadelphia. ‘‘It’s going to be this tug-of-war for a couple weeks at least.’’
    In early afternoon trading, the Dow fell 253.20, or 2.73 percent, to 9,012.23 after briefly showing a slim advance.
    Broader indexes also declined. The Standard & Poor’s 500 index fell 30.78, or 3.12 percent, to 954.62. The Nasdaq composite index shed 64.37, or 3.64 percent, to 1,705.66.
    On Monday, markets spiked on more signs of a reviving credit market and support from Federal Reserve Chairman Ben Bernanke for further steps to aid the economy, including an additional stimulus package.
    Strains in the credit markets eased further in response to a sweeping series of bailout measures by world governments, including a joint U.S. and European plan to buy stakes in private banks to boost to their lending. Demand for Treasury bills, regarded as the safest assets around, lessened further Tuesday in a sign that credit markets are gradually returning to a healthy state.
    ‘‘There is light at the end of the tunnel that this credit crisis is coming to an end,’’ said Peter Cardillo, chief market economist at Avalon Partners. ‘‘But, until we see the credit markets turn to full normalcy, the stock market is going to be stop and go.’’
    On Tuesday, the Federal Reserve took more steps to break through a credit clog that has hobbled lending and threatens to plunge the country into a deeper slowdown. The central bank announced it will start buying commercial paper — a crucial short-term funding mechanism many companies rely on for day-to-day operations — from money market mutual funds.
    The three-month Treasury bill Monday yielded 1.15 percent, up from 1.12 percent late Monday. That’s a notable improvement from the 0.20 percent seen last Wednesday, when investors were willing to take the slimmest of returns in exchange for a safe place to keep their money.
    Longer-term Treasurys rose. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.73 percent from 3.84 percent late Friday.
    Meanwhile, bank-to-bank lending rates continued their retreat, another indication that credit is getting easier to obtain. The London Interbank Offered Rate, or Libor, dropped to the lowest levels in more than a month Tuesday. The rate on three-month loans in dollars shed 0.23 percentage points to 3.83 percent, falling for the seventh straight day.
    Besides being an indicator of the credit market’s health, Libor is used to set rates for consumer loans including mortgages and credit cards.
    The dollar was higher against other major currencies, while gold prices fell.
    In corporate news, Kirk Kerkorian’s investment firm said it sold 7.3 million of its shares in Ford Motor Co. and plans further sakes. He owns a 6.1 percent stake of the company, whose shares fell 18 cents, or 7.8 percent, to $2.15.
    Chemical manufacturer DuPont said it is still recuperating from a violent hurricane season, which helped drive third-quarter earnings down 30 percent and the lower forecast. The stock fell $2.41, or 6.7 percent, to $33.76.
    Caterpillar fell $2.17, or 5.3 percent, to $38.73 after reporting that its third-quarter profit fell 6 percent. The world’s largest maker of construction and mining equipment said higher raw material costs offset record global sales. The company, which noted ‘‘recessionary conditions’’ in North America, forecast flat sales for 2009.
    Pfizer rose 6 cents to $17.40 after the drugmaker’s results narrowly topped projections for the third quarter.
    Light, sweet crude fell $3.78 to $70.47 barrel on the New York Mercantile Exchange. On Monday, rose moderately after OPEC’s president said members were planning a substantial production cut in an effort to halt falling prices.
    Declining issues outpaced advancers by nearly 3 to 1 on the New York Stock Exchange, where volume came to 538.5 million shares.
    The Russell 2000 index of smaller companies fell 15.44, or 2.82 percent, to 531.40.
    Overseas, Japan’s Nikkei stock average closed up 3.34 percent. Britain’s FTSE 100 fell 1.24 percent, Germany’s DAX index fell 1.05 percent, and France’s CAC-40 rose 0.78 percent.

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