Stocks fell modestly Tuesday after reaching four-month highs on Monday as investors await a Federal Reserve policy meeting where future quantitative easing strategies may be discussed.
The Dow Jones Industrial Average was down more than 15 points. Caterpillar and Hewlett-Packard gained, while Alcoa and Cisco fell.
The S&P 500 and the Nasdaq were both lower. The CBOE Volatility Index, widely regarded as the best gauge of fear in the market, rose above 22.
Materials, consumer staples and consumer discretionary sectors slipped, while industrials and health care rose.
September has been a banner month for stocks so far, as the major indexes rallied, breaking through trading ranges that had restrained gains throughout the summer.
In earnings news, AutoZone's shares fell despite reporting a boost of 6.7 percent in same-store sales and an unexpectedly strong 14 percent increase in profits. Sales rose almost 10 percent to $2.45 billion from $2.32 billion a year ago.
ConAgra's shares slipped after the maker of Healthy Choice frozen dinners and Hunt's tomato products, reported lower-than-expected quarterly earnings and cut its earnings growth forecast for the full year. The company's profits were hurt by higher costs for promotions and materials.
And a boost in sales allowed Carnival to report better-than-expected results Tuesday, although the cruise company was cautious about the current quarter. Carnival's shares rose.
Clorox's shares fell Tuesday after the company announced the sale of its global auto care business to Avista Capital, and said it expects to receive $780 million in cash from the deal. The proceeds will be used to buy back stock over the rest of this fiscal year, Clorox said.
Adobe Systems reports earnings after-the-bell.
Banks got a boost from Evercore Partners, which started to cover the sector with a positive view, although the news isn't universally reflected in share prices. Specifically, Evercore rated Bank of America, Comerica , Wells Fargoand Zions Bancorp "overweight," while it rated First Financial Bankshares and Huntington Bancshares "underweight."
UBS, meanwhile, began coverage of the entertainment sector with a "neutral" rating. Shares of Monster Worldwide and the New York Times fell after UBS gave the companies "sell" ratings. Viacom shares were also lower, although the company received a "buy" rating from the brokerage.
Meanwhile, shares of Whole Foods Market sank after Credit Suisse downgraded the upscale grocery store chain to "underperform" from "neutral," saying the company's sales are slowing.
Elsewhere,shares of Vivus soared after the company said studies of its experimental weight-loss drug Qnexa showed solid weight loss and no side effects for most of its users.
And Boston Scientific's shares rose after the medical equipment maker's Promus Element drug-eluting stent was approved by European regulators for a wider group of patients, including those who have diabetes.
Nike is slightly lower although UBS raised its price target for the shoe retailer to $82 from $77.
Hewlett-Packard and Oracle settled their legal dispute over Oracle's employment of ex-HP CEO Mark Hurd. Also in the technology sector, Nokia delayed introduction of its newest smartphone for a second time; the shares fell in European trading.
Sandisk sank after it was downgraded by Sterne Agee to "neutral" from "buy," although Micron Technology was slightly higher after the brokerage similarly downgraded the chip maker to "neutral."
BHP Billiton has extended the deadline for its Potash takeover biduntil November 18, after a Canadian regulator asked for more information. Analysts now think the takeover battle will drag on into 2011.
In economic news,housing starts rose 10.5 percent, the biggest boost since November, to a seasonally adjusted annual rate of 598,000, which was more than expected, the Commerce Department said. Analysts polled by Reuters had expected starts to rise to only 550,000.
Permits for new construction, meanwhile, surged 1.8 percent to a 569,000-pace in August, after a 4.1 percent drop in July, according to the Commerce Department. Most of the gains, however, were in multifamily construction.
More information on the state of housing in the U.S. will be learned later this week, as existing home sales data is reported Thursday, and new home sales data is reported Friday.
Few expect the Fed to apply another dose of quantitative easing(QE) when it announces its decision at 2:15 p.m., but there is a possibility slow growth in the economy will spark a debate on whether more stimulus is needed.
People are still feeling the effects of the financial crisis, President Barack Obama said at CNBC's Town Hall event on Monday. But he defended his administration’s efforts to fix the economic problems.
"Obviously for the millions of people still out of work, people who have seen their home values decline, people struggling to pay their home bills every day, it's still very real for them," Obama said.
Increasing pressure on euro zone debt eased after an Irish bond auction was oversubscribed. Greek and Spanish auctions of shorter term debt also went smoothly.
On Tap for Next Week:
TUESDAY: FOMC Announcement; Clinton Global Initiative; MasterCard annual meeting; earnings after-the-bell from Adobe
WEDNESDAY: Weekly mortgage applications; oil inventories; Wall Street & Washington Conference; Earnings from General Mills and Bed Bath & Beyond
THURSDAY: Weekly jobless claims; existing home sales; leading indicators; Chicago Fed President Evans speaks; Volcker speaks; FCC meeting on opening up new airwaves; Earnings from Rite Aid and Nike
FRIDAY: Durable goods orders; New home sales; Richmond Fed President Lacker speaks; Philadelphia Fed President Plosser speaks; NY Film Festival; Earnings from KB Home
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