Stocks Fall on Data, Weak Earnings

Stocks fell Tuesday, giving up the previous day's gains, as a lower-than-expected reading on consumer confidence and a string of disappointing earnings offset an IBM dividend increase, strong home sales and lower oil prices.

The Dow Jones industrial average (search) was down 91.34 points, or 0.89 percent, to end at 10,151.13. The Standard & Poor's 500 Index (search) was down 10.36 points, or 0.89 percent, to close at 1,151.74. The Nasdaq Composite Index (search) was down 23.34 points, or 1.20 percent, to finish at 1,927.44.

The sharp drop continues a turbulent time on the market in the past week, which on April 20 saw the Dow and the S&P 500 carve out six-month lows.

"We're in a very day-to-day, news-driven market," said Scott Wren, equity strategist for A.G. Edwards & Sons. "One day we're worrying about inflation. The next day we're worring about slower growth. The next day it's good earnings. In general, there's more good news than bad news, but we're paying more attention to the negative stuff for now."

Disappointing earnings from companies like chemicals maker DuPont and printer maker Lexmark International weighed on the major indexes.

Lexmark (LXK), the No. 2 U.S. printer maker, slumped 14 percent, or $11.05 to $67.70, after its profit fell short of Wall Street's expectations, reflecting a price war in the printer market.

Rival Hewlett-Packard Co. (HPQ), a Dow component, was down 3 percent, or 63 cents at $20.47 while Dell Inc. (DELL), a reseller of Lexmark products, fell 3 percent, or $1.19 to $35.52, dragging on the Nasdaq.

Meanwhile, DuPont Co. (DD) said its quarterly profit rose sharply despite increased materials costs, but the results still missed Wall Street's profit forecasts by 5 cents per share. The company's disappointing outlook for the rest of 2005 also weighed on the stock, which fell 3 percent or $1.55 to $47.03.

A disappointing reading on consumer confidence had Wall Street fearing it would result in lower consumer spending. The Conference Board's (search) consumer confidence index fell to 97.7 in April from 103 in March. The reading was slightly lower than the 98 economists expected.

Many investors remained on the sidelines in the hopes that the Fed next week could provide clarity on the economy.

"In a way, this week is kind of a wash, because everyone is going to be holding their breath for the Fed," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers in Boston. "But really, earnings are going in pretty strong and the economy is still growing and moving in the right direction, and stocks look pretty cheap right now."

On the plus side, International Business Machines Corp. (IBM), the world's largest computer company, added 82 cents to $75.43 after it raised its quarterly dividend by 11 percent, the 10th consecutive annual increase. IBM also said its board has authorized $5.0 billion in additional funds for use in its stock buyback program.

New home sales rose to an annualized rate of 1.43 million, the Commerce Department (search) said, up from 1.23 million in February. Wall Street was expecting sales to fall to 1.19 million, and the news gave further evidence that the Federal Reserve's policy of raising interest rates was not quashing interest in home buying and mortgages.

"New home sales were good — they were stronger than expected — but the expectations component of the consumer confidence data was very low and ultimately that came to rest on the shoulder of sentiment," said Paul Cherney, chief market analyst at Standard & Poor's.

"There's nervousness over the fate of the consumer, whether the consumer will continue to contribute to GDP or whether higher gas prices will crimp spending habits."

Crude oil futures fell more than $1 after Saudi Arabia said it could quickly tap spare oil capacity if needed and Iran said the oil market may be oversupplied.

Oil prices retreated for a second session, with a barrel of light crude settling at $54.20, down 37 cents, on the New York Mercantile Exchange (search). The bond market fell alongside stocks, with the yield on the 10-year Treasury note rising to 4.27 percent from 4.25 percent late Monday. The dollar was mostly higher other major currencies, and gold prices moved higher.

Lockheed Martin Corp. (LMT) rose 9 cents to $59.84 after the aerospace and defense contractor said quarterly profits rose 27 percent from a year ago. The company also raised its profit forecasts for the rest of the year, citing strong growth in its space division as well as its recently acquired subsidiaries.

Martha Stewart Omnimedia Inc. (MSO) said its revenues dropped 13 percent in the quarter but that its losses narrowed from a year ago. However, new television shows in the works, along with a line of Martha Stewart home videos and improvements in publishing, will lead to improvement in future quarters, management said. MSO gained 41 cents to $20.75 on the news.

Shares of Genentech Inc. (DNA) climbed $3.12 to $72.55 after the biotech company said the latest studies of its breast cancer drug Herceptin were halted early because the drug showed great promise in halting early stage cancers.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 165.37 million shares, compared with 145.96 million shares at the same point on Monday.

Overall, trading was moderate, with 1.56 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 1.72 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

Decliners outnumbered advancers on both the New York Stock Exchange and Nasdaq by about 2 to 1.

The Russell 2000 index of smaller companies was down 8.78, or 1.5 percent, at 587.66.

Overseas, Japan's Nikkei stock average fell 0.34 percent. In Europe, Britain's FTSE 100 closed down 0.4 percent, France's CAC-40 was flat for the session, and Germany's DAX index lost 0.31 percent.

Reuters and the Associated Press contributed to this report.