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US STOCKS-Wall Street down on weak earnings, but Boeing rallies

Julia Edwards
Wednesday, 23 Oct 2013 | 3:00 PM ET

* Caterpillar falls after results, chipmakers also drop

* Boeing's rise on higher full-year outlook curbs Dow's decline

* China may tighten cash supply to address inflation risks

* Netflix back up after previous day sell off by Icahn

* Indexes off: Dow 0.4 pct, S&P 0.5 pct, Nasdaq 0.7 pct

NEW YORK, Oct 23 (Reuters) - U.S. stocks fell on Wednesday as shares of Caterpillar and a group of chipmakers tumbled after they reported earnings, putting the S&P 500 on course to snap a four-session streak of record highs.

Results from Caterpillar Inc and Boeing Co, two Dow components, illustrated the mixed picture of the third-quarter reporting season, which has investors concerned about revenue growth and company forecasts.

Caterpillar was one of the biggest decliners on the S&P, slumping 6.2 percent to $83.64 after the heavy-equipment machinery maker cut its full-year outlook for a third time and its profit missed expectations. That sent shares tumbling by the most in a day since September 2011.

On the upside, Boeing surged 4.9 percent to $128.43 after reporting a rise in adjusted profit and raising its full-year forecast.

The smaller-than-expected September payrolls number reported by the Labor Department on Tuesday was seen as another sign of weakness in the economy.

"Earnings cannot grow if the economy is stalling or stuck in place," said Tim Courtney, chief investment officer of Exencial Wealth Advisors in Oklahoma City, who oversees about $1.2 billion in assets. "We are back to a normal scenario when weakness in the economic numbers is going to start weighing on stock prices."

About a third of S&P 500 companies have reported thus far, with 66.3 percent topping profit expectations, a rate that is slightly higher than the historical average. Roughly 54 percent have beaten on revenue, below the 61 percent long-term average, though investors worry that much of the growth in reported earnings has not been generated by revenue.

"In the next couple of years, if we don't have any economic growth and companies don't increase their earnings, bonds are going to start looking very attractive," said Courtney.

Semiconductor stocks dropped 3.4 percent a day after Broadcom, Altera and RF Micro Devices joined Intel and Texas Instruments in lowering their forecasts.

Broadcom shares fell 4.3 percent to $26.21, Altera lost 13.5 percent to $32.24 and RF Micro lost 8.4 percent to $5.65.

The Dow Jones industrial average was down 64.10 points, or 0.41 percent, at 15,403.56. The Standard & Poor's 500 Index was down 9.53 points, or 0.54 percent, at 1,745.14. The Nasdaq Composite Index was down 28.53 points, or 0.73 percent, at 3,901.03.

The S&P 500 closed at an all-time high on Tuesday, its fourth-straight record finish. The index's 23 percent gain for the year up to Tuesday was just shy of a 23.5 percent advance in 2009.

Global equity markets weakened Wednesday as China's primary short-term money rates rose on concerns the People's Bank of China may tighten its cash supply to counter inflation risks, which could hurt growth in the world's second-largest economy. Shanghai shares fell 1.3 percent.

Also weighing on sentiment, the European Central Bank said it would put major euro zone banks through rigorous tests next year to build confidence in the sector. Some analysts said that if the review reveals unexpected problems, investor confidence could be undermined.

Utilities and consumer staples, considered safe investments during a market downturn, were the only S&P sectors to rise, while all others declined. The energy sector fell the most at 1.3 percent. It was led lower by FMC Technologies Inc., which was down 7.2 percent to $53.60 following results that were below analysts' expecations.

Netflix shares were up 1.6 percent to $327.49 following a large selloff on Tuesday when billionaire investor Carl Icahn cut his stake in the company.

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