Stocks shaved off some of their earlier losses as techs staged a late-afternoon rally, but still closed mixed as investors considered news that the Federal Reserve may not provide as much stimulus to the economy as had been anticipated.
The Dow Jones Industrial Average closed down 43.18 points, or 0.4 percent to close at 11126.28, clawing back after dropping more than 148 earlier in the afternoon. This comes after the blue-chip index eked out a gain in the previous session.
McDonald's , Merck ,and Alcoa were the blue-chip laggards, while Bank of America and AmEx closed higher.
The S&P 500 closed down 3.19 points, or 0.3 percent to end at 1182.45, snapping a five-day winning streak. Meanwhile, the tech-heavy Nasdaq rose 5.97 points, or 0.2 percent to finish the session at 2503.26. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose nearly 5 percent to above 21.
Stocks had been rising in recent weeks because of some mostly upbeat earnings and mounting expectations that the Fed would embark on another round of bond-buying to stimulate the economy.
Traders have been anticipating the Fed would buy between $500 billion and $1 trillion in Treasurys to drive interest rates lower and encourage lending and spending. However, a report in The Wall Street Journal said the Fed's bond purchases might amount to a few hundred billion dollars over several months, which would fall short of those predictions.
The report came a day after William Dudley, the president of the Federal Reserve Bank of New York, said the central bank cannot fix the sluggish economy immediately.
Meanwhile, fund manager Jeremy Grantham, released an attack on the Fed policiesin a note to clients, calling the strategy of "manipulating asset prices through artificially low rates and asymmetric promises of help in tough times" dangerous and destabilizing to the economy.
The prospect of the Fed buying fewer bonds than the market had anticipated "is probably the biggest factor weighing on the markets today," said Michael Sheldon, chief market strategist at RDM Financial Group.
But Sheldon said the news may simply be an excuse some investors to take profits, considering stocks have risen considerably over the past several weeks.
"The prospects of more quantitative easing, the upcoming election and positive third quarter earnings have provided the fuel to send the market higher in recent weeks," Sheldon said. "We’ve now had a significant rally; if one of those legs is removed, that could provide a short term excuse for the market to pull back somewhat."
Energy and materials fell for a second day as the dollar rose against a basket of currencies, putting the currency on track to close higher for a second day. The technology sector edged higher in mid-afternoon trading.
ConocoPhillips fell more than 2 percent to lead a broad decline in energy stocks, despite posting third-quarter earnings that more than doubled, buoyed by higher commodities prices and improved refining margins. Rivals ExxonMobil and Chevron also closed lower.
Oil prices slipped to just below $82 a barrel, snapping a three-day rally, after the weekly government report showed a 5 million barrel gain in crude supplies in the week prior, more than expected by analysts.
Meanwhile, gold eased towards $1,330 an ounce.
Steel stocks extended losses across the board including U.S. Steel , Posco and AK Steel . In addition, gold miners such as Barrick and Kinross shed more than 2 percent each.
Jones Group shares plunged more than 20 percent after the clothing retailer report weaker profits than expected, and said the rising cost of cotton and other materials would continue to hurt earnings for the owner of Nine West and Anne Klein. Cotton prices were at their highest levelssince World War II.
Other retailers also sank, including Liz Claiborne , down nearly 6 percent, and Ann Taylor .
Also on the earnings front, Sprint-Nextel plunged almost 10 percent after the telecom firm said its loss widened, but customer numbers were better than expected.
Meanwhile, Procter & Gamble and Comcast both closed higher after the Dow component and media giant posted better-than-expected results. Comcast shares rose more than 3 percent after S&P equity raised the company to "hold" from "strong sell."
Deutsche Bank squeezed out a gain after the financial giant posted resilient profitfrom investment banking in the third quarter, bucking a weaker trend set by some rivals, as sales and trading of debt products rebounded in late September.
Shares of other bank stocks, including regional institutions, were also higher, as the KBW Bank Index rose slightly.
JPMorgan , Comerica , US Bancorp and Key Corpwere among banks on the rise. Wells Fargo slipped.
International Paper rose almost 4 percent after the firm posted a much higher-than-expected quarterly profit as demand rallied, the company further diversified its business and pricing increased.
STMicroelectronics shares climbed nearly 5 percent after the European chipmaker forecast the market would pick up in the second quarter of next year, after posting higher-than-expected quarterly profit.
In addition, Broadcom rose almost 10 percent, extending its gains after the semiconductor firm reported Tuesday that strong sales of chips used in smartphones such as Apple's iPhone helped beat forecasts with a 44 percent rise in quarterly revenue.
Other semiconductor companies got a boost including Texas Instruments and Marvell .
Shares of Hewlett-Packard slipped after news that Oracle CEO Larry Ellison said he can prove HP's new CEO, Leo Apotheker, was aware of a plan to steal Oracle softwarewhen he was CEO of SAP. Next week, a jury will decide how much SAP owes Oracle to settle the case. SAP has admitted to stealing the software.
Also on the tech front, Apple said that it would delay release of its eagerly anticipated white iPhone again, this time until next spring.
Allstate, Symantec and Visa along with a handful of other companies are expected to report earnings after-the-bell Wednesday.
Meanwhile, Barnes & Noble unveiled a color touch screen version of its Nook electronic reader as it seeks to catch up to the Kindle from Amazon.com .
In the day's economic news, sales of new U.S. single-family homes rosemore than expected at 6.6 percent in September after weakest summer in nearly five decades, according to the Commerce Department.
In addition, U.S. mortgage applications for home purchasing and refinancing posted a gain for last week. Consumers sought to take advantage of near-record low interest rates for fixed-term mortgages.
Meanwhile, September durable goods orders rose 3.3 percent, beating expectations. The previous month saw a decline of 1.3 percent.
Treasury prices were lowerafter the government sold $35 billion in 5-year notes, which had a yield of 1.33 percent and a bid-to-cover ratio of 2.82. Prices of Treasurys fell after the results. Auctions of 7-year notes are expected on Thursday.
Coming Up This Week:
THURSDAY: Jobless claims, natural gas inventories, 7-year note auction; before-the-bell earnings from 3M, ExxonMobil, Shell, Motorola, Potash, Blackstone; after-the-bell earnings from Microsoft and MetLife
FRIDAY: GDP, employment cost index, Chicago PMI, consumer sentiment, farm prices; before-the-bell earnings from Chevron, Merck and Cigna
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