Market slides after mixed signals from economic reports, 3rd-quarter earnings reports

Stocks drop after mixed economic data, earnings

NEW YORK — A disappointing report on housing starts is making investors nervous about the economy and pushing stocks lower even as profits at many companies exceed expectations.

Stocks fell from 2009 highs after the Commerce Department said Tuesday that home building rose less than expected in September. That’s a discouraging signal for construction activity.

The report has overshadowed strong earnings reports from Apple Inc., Caterpillar Inc. and insurer UnitedHealth Group Inc.

The Dow is down 51 at 10,041. The Standard & Poor’s 500 index is down 7 at 1,091. The Nasdaq composite index is down 13 at 2,163.

Two stocks fell for every one that rose on the New York Stock Exchange. Volume came to 1.1 billion, in line with Monday.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

NEW YORK (AP) — A disappointing report on housing starts made investors nervous about the economy Tuesday and sent stocks lower even as profits at many companies exceed expectations.

Stocks fell from 2009 highs after the Commerce Department said home building rose less than expected in September, a discouraging signal for future construction activity.

The market will get another measure of the housing market’s health Friday with a report on existing home sales. After several months of encouraging data on housing, investors have become disappointed in recent weeks with signs that a recovery in home building and home sales is starting to falter, which could bode poorly for the broader economy.

A rebound in the dollar from a 14-month low against other major currencies also hurt stocks by driving down commodity prices and, in turn, hurting energy and materials companies.

The housing data and the stronger dollar overshadowed strong earnings reports from Apple Inc., Caterpillar Inc. and health insurer UnitedHealth Group Inc.

There was more trouble for stocks from a Labor Department report finding that energy prices pushed U.S. wholesale prices lower in September, leaving a larger-than-expected monthly drop in the producer price index. That report helped lift the bond market, however, which tends to rise on signs of muted inflation and slow economic growth.

But Schaeffer’s Investment Research analyst Todd Salamone said the market’s ability to avoid a big slide is an encouraging sign.

“We’ve got a report that’s disappointing and the bears haven’t really gained control here,” he said. “It’s a good excuse just to take a breather.”

In late afternoon trading, the Dow Jones industrial average fell 76.25, or 0.8 percent, to 10,015.94.

The broader Standard & Poor’s 500 index fell 9.06, or 0.8 percent, to 1,088.85, and the Nasdaq composite index fell 16.44, or 0.8 percent, to 2,159.88.

Treasury prices rose, pushing their yields lower, after the drop in producer prices. Inflation is a worry for bond investors because rising prices can eat into returns. The yield on the 10-year Treasury note fell to 3.33 percent from 3.39 percent late Monday.

The dollar and gold rose. Crude oil lost ground for the first time in a week, falling 52 cents to settle at $79.09 a barrel on the New York Mercantile Exchange. Oil rose to $80.05 during the day, its highest level in a year.

The day’s slide came as investors navigate a busy week of corporate earnings reports for signals about the economy. Profits have topped expectations but many companies have relied on slashing costs to boost profits as they did in the first half of the year. That has some analysts worried.

Dan Cook, senior market analyst at IG Markets in Chicago, is concerned that companies aren’t brining in more revenue. He noted that reducing costs by laying off workers adds to the problems facing the overall economy.

“We call it cost-cutting because that’s kind of the nice term, but in reality a lot of those are consumers,” he said.

Cook said companies won’t be able to keep coming up with profits that top expectations if improved profits don’t translate to a stronger economy.

“Right now we’re on a divergent path,” he said, referring to earnings and the economy. “It’s only a matter of time before that has to catch up.”

Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, contends that for now, any improvement in profits are good.

“In these tough times any kind of earnings power that these companies are talking about whether it’s revenue growth or cost-cutting — we’re happy about it,” he said.

Apple reported much stronger profits after the markets closed on Monday, citing big gains in sales of iPhones and Mac computers. Texas Instruments’ results came in above the improved forecast the chip maker issued last month.

Apple rose $8.94, or 4.7 percent, to $198.80, while Texas Instruments slipped 1 cent to $23.51.

Caterpillar Inc. rose $1.79, or 3.1 percent, to $59.64, while UnitedHealth Group jumped $1.04, or 4.2 percent, to $25.96.

More than two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 937.1 million shares compared with 778.8 million shares traded at the same point Monday.

The Russell 2000 index of smaller companies fell 9.32, or 1.5 percent, to 613.02.

Overseas, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index lost 0.7 percent and France’s CAC-40 fell 0.5 percent. Japan’s Nikkei stock average rose 1 percent.