Stocks struggled Tuesday as worries about a drop in consumer confidence offset better-than-expected result from DuPont. Energy and consumer discretionary were among the weakest sectors.
Apple rose and Walmart fell.
Some experts said the pullback is likely to be only a temporary breather for the markets which have rallied in five of the past six sessions. The Dow has posted triple-digit gains for three consecutive sessions for the first time since December 30, and 31 of 2008 and January 2, 2009.
“After three straight days of 100-point [gains], I don’t know that we power forward from here without some pause, but I think the direction is higher because the economy is on a recovery path,” said Jim Meyer, CIO of Tower Bridge Advisors.
Meanwhile, the Conference Board reported its gauge of consumer confidence fell to 50.4in July from 54.3 in June; economists surveyed by Reuters had expected the index to drop to 51.
Meyer said confidence levels are at the bottom and will improve going forward as the stock market fears and double-dip worries gradually subside.
Consumer spending is crucial to the economic recovery as it accounts for more than two-thirds of economic activity.
"Concerns about business conditions and the labor market are casting a dark cloud over consumers that is not likely to lift until the job market improves," said Lynn Franco, director of the Conference Board Consumer Research Center. "Given consumers' heightened level of anxiety, along with their pessimistic income outlook and lackluster job growth, retailers are very likely to face a challenging back-to-school season."
Consumer-discretionary stocks were among the worst performers, with Gap and Best Buy both down more than 3 percent.
Teen chains Abercrombie & Fitch and Delia*'s fell almost 3 percent.
Walmart shares were slightly lower after brokerage Stifel Nicolaus downgraded the retail giant to "hold" from "buy."
"We simply expect Wal-Mart will be 'turning the battleship' for some time due to recent managerial changes," analysts said.
Meanwhile, Stifel upgraded wholesaler Costco to "buy" from "hold."
DuPont shares led the Dow gainers, after the company beat earnings estimates of 94 cents per share with its profit of $1.17 per share excluding items.
Hewlett-Packard and Pfizer were also among the top Dow winners.
However, strategists warned that earnings results are not enough of a catalyst to stimulate the markets.
"Earnings are one leg of the stool, unfortunately," said Jack Ablin, CIO of Harris Private Bank. "Profits can only go so far if there’s no jobs being created."
He recommended investors to focus on consumer discretionary, industrials and financials—sectors which are "enjoying positive momentum."
Financials were the best-performing sector, with Bank of America and JPMorgan trading higher, after strong earnings from Swiss bank UBSand from Germany'sDeutsche Bank.
The Treasury Department announced a conference for next month to discuss plans for Fannie Mae and Freddie Mac.
Treasurys continued to fallafter the latest round of 2-year note auctions. The $38 billion sale fetched a high yield of 0.665 percent and the bid-to-cover ratio was 3.33.
Auctions of 5-year and 7-year notes are expected on Wednesday and Thursday, respectively.
And in the day's other economic news: Home prices rose more than expectedin May, according to the latest Standard & Poor's/Case Shiller home-price indexes.
Energy stocks were lower, including shares of BP , which slipped after the oil giant posted a $17 billion dollar second-quarter loss due to the costs of the Gulf oil spill and announced that Bob Dudley will succeed Tony Hayward. Hayward will be transferred to BP's operations in Russia.
Commodities fell across the board with oil prices trading below $78 a barrel, reversing an earlier rally. And gold slipped almost 2 percent, hitting a twelve-week low near $1,160 an ounce.
Apple shares were higher after the U.S. copyright office made a ruling that will allow iPhone users to add different software to their phones— including the right to change wireless-service providers.
Yahoo's part-owned Yahoo Japan unit is teaming up with Google to offer Google's search engine technology, sidestepping Yahoo's extensive partnership with Microsoft.
Insurers Aetna and Aflac are among those issuing their quarterly numbers after the closing bell, along with chip maker Broadcom.
TUESDAY: Earnings from Aetna and Broadcom after the bell
WEDNESDAY: Weekly mortgage apps; advance report on durable goods; 5-yr note auction; Beige Book; Earnings from: Boeing, Comcast, ConocoPhillips, Sprint and Visa
THURSDAY: Weekly jobless claims; 7-yr note auction; Microsoft analyst meeting; Earnings from: AstraZeneca, ExxonMobil, Royal Dutch Shell, Kellogg, Motorola and Amgen
FRIDAY: First release of 2Q GDP; employment cost index; Chicago PMI; consumer sentiment; Earnings from: Chevron and Merck
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