Stocks bounced off session lows to close mixed on Wednesday but a late afternoon rally fizzled as investors were wary of initial quarterly earnings reports which came in largely below forecasts.
"We have been having record levels for a while now and I think some people ready to take some profits," said John Conolly, vice president at Advantage Futures.
The major market indexes were mixed as the Dow Jones Industrial Average recovered from a midday swoon that sent the blue chip index down as much as 150 points. The Dow's decline was sparked by news that Boeing will delay delivery of its new Dreamliner commercial jet.
The broader S&P 500 ended down slightly, pulling back modestly from the new closing high set on Tuesday. Meanwhile, the technology-focused Nasdaq Composite managed to eke out gains, due in part to continued momentum for tech shares.
"The market is struggling and breadth has been augmented by foreign stocks and ETFs," said Phil Roth, chief technical market analyst at Miller Tabak. "Narrow markets usually get narrower before they broaden out so this could continue."
Boeing said it will need at least another six months before it can make the first deliveries of its 787 Dreamliner. The aerospace company said Wednesday it was struggling with assembly of its new lightweight, carbon-composite plane.
Alcoa fell as much as 4% after reporting third-quarter earnings a penny below Street expectations on Tuesday evening. Shares of the basic materials firm were the worst performer among the 30 Dow constituents as several Wall Street analysts ratcheted expectations down for company.
"We're seeing a little bit of a wait-and-see attitude in the market," said Alec Young, market strategist at S&P Equity Research. "Everyone knows third-quarter earnings are going to be lousy so it's going to be all about guidance; you want to see the guidance validate the rally that we had."
Energy stocks closed with gains of 1% despite a number of earnings warnings from several industry bellwethers. The financial sector paced losing sectors with a loss of 1% on the day.
Shares of Chevron fell after the company said late Tuesday that lower refining margins would substantially hit third-quarter profit. Meanwhile, refining giant Valero said that the high price of crude would hit its margins and weaken quarterly results.
Disappointment with profits could trigger a 3% to 5% pullback in the stock market, said Peter Cardillo, chief market economist at Avalon Partners.
Petsmart joined the growing number of companies to lower their third-quarter expectations, as weak consumer spending hit the retailer's bottom line.
Costco Wholesale shares jumped after the No. 1 U.S. warehouse club operator reported better-than-expected earnings and posted September same-store sales above Wall Street estimates.
U.S. government bonds gained on Wednesday as investors pulled money out of sagging stocks on worries about the outlook for corporate profits and parked it in Treasurys. Bond traders will likely be looking for signs of inflation when the government releases import price data on Thursday.
Light sweet crude rose 1.3% to close at $81.30 a barrel on the New York Mercantile Exchange. After a pullback last week, oil prices advanced for the second straight day and now sit just 2.4% below the record closing price of $83.32 made on Sept. 20.