Stocks fall moderately after disappointing earnings, consumer income and spending report

The stock market has retreated from its big gain after disappointing earnings and economic reports reminded investors of the obstacles still facing the economy.

From the start of trading Tuesday, investors had a bleaker view of the recovery than they did during a rally on Monday. Procter & Gamble Co. and Dow Chemical Co. reported earnings and revenue that fell short of forecasts. And consumer spending and income figures showed that people are still very cautious with their money.

The Dow Jones industrial average fell 38, or 0.4 percent, to 10,636 after rising 208 Monday. The Standard & Poor's 500 index fell 5, or 0.5 percent, to 1,120. The Nasdaq composite index fell 11, or 0.5 percent, to 2,283.

Losing stocks were ahead of gainers by about 2 to 1 on the New York Stock Exchange. Volume was very light at 997 million shares.

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

NEW YORK (AP) — The stock market pulled back Tuesday from its big rally after disappointing earnings and economic reports raised investors' concerns about the strength of the recovery.

The market's major indexes fell modestly in afternoon trading. The Dow Jones industrial average was down about 31 points, retreating from a 208-point gain Monday that came on brighter economic numbers. Investors have found it hard to reconcile the mixed reports of the past few months, and are quick to sell on any news that points to a weaker economy.

On Tuesday, they reacted to earnings and revenue at consumer products maker Procter & Gamble Co. and Dow Chemical Co. that fell short of forecasts. The market has been focusing on revenue figures because they indicate whether consumer spending is improving enough to keep the recovery going.

The day's economic reports added to the market's sour mood. The Commerce Department said consumer spending and income were unchanged in June, another sign of a slower economy. The country's savings rate rose, which means consumers would rather hold on to their money or pay down debt than spend.

The department also said factory orders dropped more than predicted in June, falling 1.2 percent. And a separate report from the National Association of Realtors said pending home sales fell in June.

The combination of disappointing earnings and weak economic readings reminded investors that the economy is still uncertain. Traders are also uneasy ahead of the Labor Department's July employment report due out Friday. Consumers are not expected to significantly increase their spending until they feel more secure about their jobs.

Trading volume remained very light as many investors stayed out of the market. Dan Cook, a Chicago-based senior market analyst with the brokerage firm IG Markets, said they're waiting to see the employment report.

"These severely choppy markets are scaring individual investors," he said. "There's no way we can get them back in the game without getting the employment numbers up."

In late trading, the Dow Jones industrial average fell 31.18, or 0.3 percent, to 10,643.20. The Standard & Poor's 500 index fell 4.05, or 0.4 percent, to 1,121.81, while the Nasdaq composite index fell 8.48, or 0.4 percent, to 2,286.88.

Rising stocks slightly outpaced those that fell on the New York Stock Exchange where volume came to 585 million shares. Volume remains light, which can intensify the market's price swings.

Investors sought the safety of Treasury bonds, which pushed interest rates lower. Reports the Federal Reserve could start buying bonds again also added to their strength. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.91 percent from 2.97 percent late Monday.

Tuesday's pullback in stocks was also to be expected after such a big gain on Monday, which came on renewed optimism about the economy. Trading has been erratic since the spring amid the conflicting signals about the recovery, and many traders are quick to cash in any profits.

Jack Stoltzfus, senior market strategist with Ticonderoga Securities, said the market is likely to vacillate for a while with investors hesitant to buy heavily amid ongoing concerns about the economy, not just in the U.S. but in other countries as well.

"It's a market that goes from worry to celebration pretty quickly," he said. "It is prone to surprises as well as prone to disappointments."

Procter & Gamble, the maker of Tide and Pampers, fell $2.33, or 3.7 percent, to $59.73. Dow Chemical dropped $2.57 or 9.1 percent, to $25.76. Pfizer rose 83 cents, or 5.3 percent, to $16.31.

The National Association of Realtors said its index of pending home sales fell to its lowest level since it began keeping records in 2001. The index dropped 2.6 percent to a reading of 75.7. Economists had predicted that the index that measures the number of people who signed contracts to purchase homes would rise to 78.1.

A housing recovery is expected to be slow now that tax incentives for buyers have expired. And many would-be buyers are worried about their jobs.

The Commerce Department said personal income and spending were both unchanged in June after rising 0.3 percent and 0.1 percent respectively in May. The readings were also short of forecasts of economists polled by Thomson Reuters.

The department also said factory orders fell 1.2 percent in June, the second consecutive monthly drop and more than double the amount economists expected. The results come a day after a broader manufacturing survey showed expansion in the sector in July.

Overseas, Britain's FTSE 100 fell less than 0.1 percent, Germany's DAX index rose 0.3 percent, and France's CAC-40 fell 0.1 percent. Japan's Nikkei stock average rose 1.3 percent.