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Stocks Pull Back; Apple, CAT Gain

Stocks retreated Tuesday after several earnings reports beat expectations but economic numbers missed their targets.

Caterpillar led Dow gainers after the construction machinery manufacturer smashed analyst estimates with profit of 64 cents. It also raised its full-year outlook, saying it's seeing signs of recovery.

It was followed by Pfizer , after the drug maker beat on both earnings and revenue— even though revenue declined from a year earlier. Aggressive cost-cutting measures helped offset a negative impact of exchange rates and sliding drug sales amid generic competition.

Dow components Coca-Cola and DuPont skidded after their results. Coke beat on earnings but missed its revenue target. DuPont beat expectations on earnings but missed on revenue and narrowed its earnings outlook for the year.

Over on the Nasdaq, Apple shares surged more than 5 percent after the iPod and iPhone maker blew past earnings and revenue expectations. The company said it earned $1.82 a share on revenue of $9.87 billion. Analysts polled by Reuters had expected earnings of $1.42 a share on revenue of $9.21 billion.

Analysts said the earnings indicate that consumer spending is coming back. Apple was also upbeat about the holiday season, which is usually a blockbuster quarter for the company. Analysts seemed to agree.

"These are huge numbers ... Apple is probably the best growth story in tech, maybe one of the best growth stocks in the market. I bet this stock can go to $250 in six to nine months," Jane Snorek, analyst at First American Funds, told Reuters. "Usually Christmas and back-to-school are correlated and Apple usually has a gigantic Christmas quarter. This makes me think Apple will have a great Christmas."

Giving a boost to chips, Texas Instrumentsbeat on both earnings and revenue, saying its customers are starting to build inventory again.

This came after chip leader Intel beat on both profit and revenue last week, saying its seeing stronger PC demand and signs of improvement in business spending.

After the bell today, we'll get a report from Internet portal Yahoo .

While there have been a few missteps this earnings season, investors have been encouraged by the beats and the outlooks, sending major indexes to new highs for the year on Monday. The S&P 500 cracked 1,100 intraday Monday for the first time since October 3, 2008, though it did not finish there. The Nasdaq logged its highest close since September 26, 2008.

Putting a damper on the market was this morning's economic news: Readings on both PPI and housing starts missed expectations. Producer prices dropped by 0.6 percent in September, more than the 0.3-percent drop economists had expected. Housing starts rose 0.5 percent last month, less than the 2.8-percent increase expected.

On the M&A front, staffing company Adecco is buying MPS Group for $1.3 billion or $13.80 a share, a 24 percent premium over the most recent close for MPS.

Morgan Stanley is selling its retail asset management division to Invesco for $1.5 billion - that division includes both the Morgan Stanley and Van Kampen brand names. Morgan Stanley will get a 9.4 percent stake in Invesco.

- Peter Schacknow contributed to this article.

This Week:

TUESDAY: Madoff sons' hearing; report on college pricing; Fed's Plosser speaks; Earnings from SanDisk, Seagate and Yahoo after the bell
WEDNESDAY: Weekly mortgage apps; weekly crude inventories; Fed's beige book; Fed's Rosengren speaks; Earnings from Boeing, Eli Lilly, Wells Fargo, Altria, AMR, Continental, Morgan Stanley, USBancorp and eBay
THURSDAY: Weekly jobless claims; leading indicators; Fed's Rosengren, Lockhart and Dudley speak; Earnings from AT&T, Bristol-Myers, McDonald's, Merck, MMM, Travelers, UPS, Schering-Plough, Xerox, Amazon, AmEx, Braodcom and Capital One
FRIDAY: Fed chief Bernanke speaks; existing-home sales; Fed's Kohn speaks; Earnings from Microsoft, Honeywell and Ingersoll-Rand

Send comments to cindy.perman@nbcuni.com.