U.S. stocks traded mostly lower on Tuesday as lackluster earnings reports in some Dow components pressured investor sentiment.
“Basically it’s all about two stocks that are weighing on the blue chip index. But they’re basically down fractionally. It doesn’t really indicate any reversal at this time,” said Peter Cardillo, chief market analyst at Rockwell Global Capital. “It’s all about earnings and waiting for Apple, which is probably going to be the market leader tomorrow either one way.”
The Dow Jones industrial average extended losses, briefly falling more than 225 points, or 1.2 percent. In the open, the index lost more than 100 points to trade below 18,000 as IBM and United Technologies plunged more than 6 percent and 7.5 percent, respectively.
“We’ve had better-than-expected earnings so far,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “I’m sure IBM is weighing on the market here … and obviously that is a big component of the Dow industrials.”
He also noted some profit taking as the other two averages traded mildly lower.
Shares of the tech firm fell about 6 percent in pre-market trade andstock futures for the Dow Jones industrial average were down about 70 points while Nasdaq futures turned lower. S&P 500 futures were lower by about 4 points.
United Technologies earned $1.73 per share for the second quarter, 2 cents above estimates, with revenue shy of forecasts. The industrial conglomerate also cut its full-year forecast, in part to reflect the just-announced sale of its Sikorsky Aircraft unit to Lockheed Martin.
Another blue chip, Verizon, also declined with a fall of about 2.5 percent as revenue came in below estimates. The telecom firm did post earnings 3 cents above estimates with second-quarter profit of $1.04 per share. Wireless revenue was up 5.3 percent compared to a year earlier, while FiOS revenue increased by 10 percent.
“It would be an overreaction if we had an overvalued stock market and we don’t,” said Bruce Bittles, chief investment strategist at RW Baird. “An environment like this where price-earnings ratios are rich, price to sales are the highest we’ve seen … you’ve got a market priced to perfection.”
Verizon also weighed on the telecommunications sector, down more than 1.6 percent as the worst performer in the S&P 500.
Several regional banks and major financial institutions hit multi-year highs to push financials to a 7-year high before turning lower.
“It’s more range-bound action as the market pauses,” said Adam Sarhan, CEO of Sarhan Capital. “As long as new leadership emerges, the bull market is alive and well.”
The S&P 500 has held between 2,040 and 2,130 for the last few months.
Earnings so far have mostly beat expectations. Google surged more than 16 percent on Friday to push the Nasdaq to a record high. The tech and biotech-heavy index ended at another record on Monday.
Google Class A shares gained more than 1 percent to top $700 a share.
“I think Greece and China are off the table now,” said Doug Cote, chief market strategist at Voya Investment Management. “The focus now is on fundamentals and corporate earnings and as we get to the big reports at the close you want to be in this market ahead of that.”
Tech giants Apple and Microsoft post quarterly results after the close. The iPhone maker traded nearly 1 percent lower and Microsoft briefly attempted slight gains before falling 0.75 percent.
“One stock makes up such a large part of the index that you get artificial (elevation),” said Lance Roberts, general partner at STA Wealth Management. “Any negative commentary that comes out of Apple today could weigh on the Dow, S&P and Nasdaq.”
No economic data is due Tuesday. The only reports expected for the week are in the housing market, with the FHFA home prices and existing home sales scheduled for Wednesday.
Travelers reported adjusted profit of $2.52 per share, beating estimates of $2.12, though revenue was slightly below forecasts. The insurers’ bottom line was helped by a significant drop in catastrophe losses.
Commodities remained in focus, with gold struggling to hold above $1,100 an ounce after falling below that psychologically key level to a five-year low on Monday.
Crude oil also attempted to recover from recent lows, trading above $50 a barrel after dipping below that price for the first time since April 6 on Monday.
Crude oil futures for August delivery settled down 2 cents at $50.89 a barrel on the New York Mercantile Exchange. Gold futures ended down $3.30 at $1,103.50 an ounce.
The U.S. dollar traded nearly 1 percent lower, while the euro traded higher near $1.09 and the yen strengthened slightly against the dollar at 123.9 yen.
The U.S. 10-year Treasury yield extended losses to trade near 2.35 percent.
European stocks closed lower, with the DAX off more than 1 percent, as investors focused on earnings. Greece’s stock exchange remained closed, while the local banks reopened on Monday for the first time in three weeks.
On Monday, Greece repaid debts due to the European Central Bank and International Monetary Fund. Athens should conclude bailout talks with its international creditors by August 20, once parliament approves the second package of measures demanded by the lenders on Wednesday, the government’s spokeswoman told Reuters.
The Dow transports traded half a percent higher.
The S&P 500 traded down 13 points, or 0.59 percent, at 2,115, with telecommunications leading all 10 sectors lower.
The Nasdaq traded down 19 points, or 0.36 percent, at 5,200.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.
About two stocks declined for every decliner on the New York Stock Exchange, with an exchange volume of 412 million and a composite volume of 2.0 billion as of 2:13 p.m.
—Reuters and CNBC’s Peter Schacknow contributed to this report.
On tap this week:
Earnings: Apple, Microsoft, Yahoo, Chipotle Mexican Grill, GoPro, Intuitive Surgical, Linear Technologies, iRobot
Earnings: Coca-Cola, Boeing, American Express, Abbott Labs, Texas Instruments, Cheesecake Factory, Discover Financial, SanDisk, Qualcomm, Fortune Brands, Raymond James, Newmont Mining, Ameriprise, Cirrus Logic, Graco, Sallie Mae, Select Comfort, Morningstar, Weatherford, Xilinx, F5 Networks, St. Jude Medical, Six Flags, AutoNation, Tupperware, Owens Corning
9:00 a.m. FHFA home prices
10:00 a.m. Existing home sales
Earnings: Caterpillar, Eli Lilly, Amazon.com, General Motors, Comcast, McDonald’s, Starbucks, Visa, Capital One, Bristol-Myers Squibb, Union Pacific, Roche Holdings, Dow Chemical, Celgene, Credit Suisse, Dr. Pepper Snapple, Alaska Air, Southwest Air, Dunkin Brands, Pulte, Raytheon, Freeport-McMoran, Stryker, Nasdaq OMX, Kimberly-Clark, Stryker, Pandora, Flextronics, Ruby Tuesday
8:30 a.m. Initial claims
Earnings: Biogen, Johnson Controls, State Street, Xerox, Moody’s, Cabot Oil and Gas, Spirit Airlines
9:00 a.m. Markit Manufacturing PMI
10:00 a.m. New home sales