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Stocks close lower, S&P 500 retreats from record run; Caterpillar tumbles 6%

Pisani's market close: Very overbought today

Stocks finished lower Wednesday, with the S&P 500 snapping a four-day streak of record highs, following weakness in global equities and a mixed bag of earnings reports.

(Read more: After-hours buzz: AT&T, Akamai, Visa & more)

Major U.S. Indexes: DJIA, NCOMP, SPX

The Dow Jones Industrial Average fell 54.33 points to end at 15,413.33, dragged sharply lower by Caterpillar.

The declined 8.29 points to close at 1,746.38. And the Nasdaq fell 22.49 points to finish at 3,907.07.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, climbed to close above 13.

Most S&P sectors ended in the red, dragged by energy and materials, while defensive sectors such as utilities and consumer staples kept a limit on losses.

The S&P 500 set a record high for the fourth-straight session Tuesday, closing above 1,750 for the first time, after the tepid September jobs report gave further evidence to investors that the Federal Reserve will continue to support the economy at the current pace. Meanwhile, the Dow is within 1.5 percent of its all-time record set last month.

"Thanks to some overly enthusiastic economic projections that look more and more out of line with reality and a dysfunctional Congress that caused a very partial short-term government shutdown, the Federal Reserve appears likely to allow the current pace of quantitative easing to continue unabated," wrote Scott Wren, senior equity strategist at Wells Fargo Advisors. "When we add it up, the tapering phase of QE is unlikely to start until the first few months of 2014 at the earliest."

Level of interest in stock market is falling

Among earnings, Caterpillar tumbled after the heavy equipment maker missed earnings expectations and slashed its full-year revenue guidance. CEO Doug Olberhelman called this year "difficult," especially in Caterpillar's mining-related business.

Meanwhile, fellow Dow component Boeing rallied after the jet maker posted quarterly results that easily topped expectations and raised its full-year outlook. The company also lifted its production scheduled for the Dreamliner to 12 units per month from 10 by 2016.

AT&T, Akamai and E-Trade are among notable companies scheduled to report earnings after the closing bell.

So far, 160 S&P 500 companies have reported results so far, with nearly 66 percent topping earnings expectations, and 54 percent beating revenue estimates. If all remaining companies report earnings in line with estimates, earnings will be up 2.6 percent from last year's third quarter.

Adding to woes, Bloomberg reported that top Chinese lenders, including Industrial and Commercial Bank of China (ICBC), wrote off about $3.7 billion in bad debt for the first six months of the year, higher than last year. Japan's Nikkei and the Shanghai Composite hit one-week and two-week lows following the report.

In addition, official Chinese media reports stated that the country's central bank may look to tighten liquidity with a policy adviser to the People's Bank of China (PBOC) telling Reuters the authority may look to tighten to address inflation risks.

"The Asian trading session today has seen some pick-up in volatility with equity markets across the region lower…Real GDP growth appears to be improving in China but confidence is likely to remain fragile given these lingering concerns over the degree of bad loans in the banking sector," wrote Bank of Tokyo-Mitsubishi's Derek Halpenny in a research note.

And adding pressure to the market, the European Central Bank announced it would begin a stress test for about 130 banks in November to see whether they are strong enough to withstand another financial crisis. European shares closed lower.

Caterpillar weighs on the Dow

On the economic front, U.S. import prices gained 0.2 percent in September, but there was no indication of a rise in imported inflation pressures, according to the Labor Department. In the 12 months through September, import prices declined 1.0 percent.

Apple nudged higher a day after the tech giant unveiled its new iPad Air and iPad Mini. And Evercore lifted its price target on the company to $630 from $600.

(Slideshow: Rising smartphone stars look to outshine Apple)

Netflix rose after plunging more than 9 percent in the previous session after the movie streaming company's CEO expressed concerns over the stock's valuation. Late Tuesday, billionaire investor Carl Icahn revealed that he had cut his stake in the company to 4.5 percent from 9.4 percent. The filing came a day after the company delivered strong earnings.

Safeway soared after Reuters reported that several buyout firms, including Cerberus Capital, for all or part of the supermarket chain, citing sources familiar with the matter.

And Corning spiked more than 10 percent to lead the S&P 500 gainers after the glass maker said it would buy out Samsung Display's stake in their LCD glass joint venture. The deal includes a new 10-year LCD display glass supply agreement between Corning and Samsung Display that will add nearly $2 billion to Corning's annual revenue.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

On Tap This Week:

THURSDAY: Jobless claims, PMI mfg index, new home sales*, natural gas inventories, Kansas city mfg index, Fed balance sheet/money supply; Earnings from Ford, 3M, Credit Suisse,, Microsoft, Western Digital, Zynga
FRIDAY: Durable goods orders*, consumer sentiment, iPhone 5s & 5c sold overseas, Twitter roadshow begins; Earnings from P&G, UPS

(*Report likely delayed due to government shutdown)

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