The US stocks fell on Tuesday after economic data renewed concerns about growth and inflation, while a broker downgrade of Intel Corp ahead of its earnings, compelled investors to pull back after a rally that pushed the Dow through several record highs.
Major indexes rebounded off their worst levels in late afternoon trade after a reading of home-builder sentiment came in stronger than expected and signalled the slumping housing market might be stabilising. A drop of more than $1 in crude oil prices provided further support. Shares of Dow component Intel, the world's largest chip maker, dropped nearly 3.3 percent, or 71 cents, to $20.90 on the Nasdaq, after Goldman Sachs cut the company's stock rating, citing valuation concerns.
Tuesday's economic data included a government report that showed September's core producer prices exceeded expectations, and increased concerns the Federal Reserve would delay any cut in interest rates while industrial output fell, raising concerns companies may not sustain double-digit earnings growth.
The major US stock indexes snapped a three-session string of gains, causing the Dow Jones industrial average to backtrack from a bid to top 12,000. On Monday, the Dow came within three points of the milestone.
"All we are seeing as far as today's decline is profit-taking after the last four or five days of a pretty good rally," said Paul Nolte, director of investments at Hinsdale Associates, in Hinsdale, Illinois. The Dow Jones industrial average fell 30.58 points, or 0.26 percent, to end at 11,950.02. The Standard & Poor's 500 Index was down 5.00 points, or 0.37 percent, at 1,364.05. The Nasdaq Composite Index was down 18.89 points, or 0.80 percent, at 2,344.95.
"The market is overbought and due for a pullback, but sentiment is extremely positive - investors who have missed out on the advance may be contributing," said Michael Sheldon, chief market strategist with New York brokerage Spencer Clarke.
Intel, which is set to report quarterly earnings after the closing bell, was among the heaviest weights on the Nasdaq 100. Intel also was among the biggest drags on the Dow and the S&P 500 and contributed to a 2.5 percent drop in the semiconductor index, its biggest decline in more than a month. Shares of Qualcomm Inc, another chip maker, slid 2.2 percent, or 88 cents, to $38.94 and ranked as the biggest drag on the Nasdaq 100.
Diversified manufacturer United Technologies Corp said on Tuesday earnings rose 21 percent, topping Wall Street's forecasts. But investors sold the Dow component's stock as the company also warned a cooling US housing market could take a toll on its future earnings.
UTX slid 2.3 percent, or $1.51, to $65.28 on the New York Stock Exchange and was the biggest drag on the Dow. A burst of deal news, including a planned $8 billion take-over of CBOT Holdings Inc by rival Chicago Mercantile Exchange Holdings Inc, helped provide a floor to the market, along with stronger-than-expected profits from such companies as Merrill Lynch & Co and Johnson & Johnson.
US crude oil futures fell more than $1 on options expiration day for November crude, a day ahead of the Opec meeting at which ministers will try to hammer out a formal agreement to cut production. On the New York Mercantile Exchange, November crude slid $1.01 to settle at $58.93 a barrel.
Volume was fairly active on the NYSE, where about 1.52 billion shares changed hands, below last year's average daily volume of 1.61 billion. On Nasdaq, about 2.16 billion shares traded, exceeding last year's average daily volume of 1.80 billion. Decliners outnumbered advancers by a ratio of about 5 to 3 on the Big Board, and by roughly 3 to 2 on the Nasdaq.