Oil Surge, Earnings Drag Down Stocks

Stocks declined Tuesday as oil's surge toward $120 a barrel exacerbated concerns about the economy and profits.

Light crude blew past a record $119 a barrel Tuesday, buoyed by a jump in demand from China, the world's second-largest energy consumer, and concerns about supplies from Russia and Nigeria.

"Traders are looking at the skyrocketing oil price right now," Ben Lichtenstein, president of Tradersaudio.com, told CNBC. "That will keep a lid on the market for the most part."

Among stocks most impacted by oil prices, an index of airline stocks plunged 12 percent, while an index of retail stocks dropped 2.6 percent.

In economic news, existing-home sales fell 2 percent to an annual rate of 4.93 milllion, meeting expectations, according to a report from the National Association of Realtors. The inventory of homes for sale jumped to a 9.9 months' supply. The median national home price dropped 7.7 percent from a year earlier to $200,700.

After the latest batch of earnings, traders punished companies that reported disappointing earnings as well as those with reports that weren't so bad, choosing to focus on the weak points.

DuPont reported its profit rose 26 percent, helped by strength in its agricultural business. Still, the stock was the biggest decliner on the Dow amid concerns after the company backed its full-year forecast but said the rest of the year would be challenging due to weakness in the U.S.

Fellow Dow components McDonald's and AT&T reported results ahead of the opening bell. AT&T reported its profit climbed 21 percent, in line with analyst estimates, led by strong growth in its wireless division. Land-line subscriptions, however, declined. McDonald's blew past expectations amid strong overseas sales. Same-store sales rose 7.4 percent, but such sales were up just 2.9 percent in the U.S.

Weighing on tech stocks, Texas Instruments said after bell Monday that its profit rose but slashed its forecast for the current quarter, citing lower demand for chips used in cell phones.

UnitedHealth Group missed earnings targets amid weakness in its business serving employers and slashed its full-year forecast.

"People are looking at [earnings] outlooks. They're worried about the economy. I think you need to see outlooks pick up, and that will help the market come back," Giri Cherukuri, head trader at Oakbrook Investments LLC in Lisle, Ill., told Reuters.

A half dozen analysts, including Punk Zeigel's Richard Bove and Oppenheimer analyst Meredith Whitney, slashed their earnings forecast for Bank of America , and several also cut their price targets on the stock, amid concerns about higher credit costs and loan-loss provisions. Bank of America said Tuesday that it plans to stop offering some riskier mortgages after it completes its acquisition of Countrywide Financial, the largest U.S. mortgage lender. A day earlier, Bank of America reported its earnings plunged 77 percent but said it expects earnings to take an "upward trajectory" this year.

Elsewhere in the financial sector, regional banks SunTrust and Fifth Third posted sharply lower earnings as the banks, heavily exposed to real-estate market, set aside substantially more money to cover bad loans. Southeast bank chain SunTrust reported its profit fell 45 percent and missed analyst estimates by a long shot as the bank set aside 10 times more for credit losses than it did a year earlier. Fifth Third, which operates banks in the Midwest, reported a 19-percent decline in earnings amid a fivefold increase in bad-debt reserves.

Commercial-finance company CIT Group , which can't borrow directly from the Federal Reserve, said it sold $1.5 billion of common and convertible preferred stock, 50 percent more than expected, a move that dilutes the holdings of existing shareholders. CIT has also agreed to sell more than $5 billion of assets and loan commitments and is considering selling an additional $2 billion of loan assets.

This comes a day after Citigroup announced an offering of $6 billion in preferred shares and about a week after JPMorgan raised $6 billion.

BJ Services skidded after the oilfield-services company missed analysts' earnings target, hurt by lower prices in North America.

Also in earnings, retailer Kimberly Clark and industrial giant Lockheed Martin