Stocks fell Tuesday as the first quarter earnings season got off to a disappointing start.
Also, Washington Mutual (WM) said mounting mortgage losses forced it to seek $7 billion in new capital, while tech firms reported disappointing news.
Analysts are predicting the recent economic slowdown will make for a gloomy earnings season, and Alcoa (AA), traditionally the first company to report profits, started the quarter with a disappointment.
The aluminum giant posted lower-than-expected earnings of 44 cents per share from the first three months of the year, vs. 79 cents a year ago. Revenue fell 6.7%. Higher input and energy costs hurt results.
According to Reuters Estimates, analysts now predict S&P 500 companies' earnings to fall 11.8% from a year ago, worse than the 8.1% drop they predicted a week ago. However, much of the fall in earnings came be blamed on the financial sector, which is expected to see profits plunge 61%.
On Tuesday morning, the Dow Jones Industrial Average was down 48.93 points, or 0.4%, to finish the session at 12,562.60. The S&P 500 index lost 6.38 points, or 0.46%, to 1,366.16. The Nasdaq composite index fell 18.31 points, or 0.77%, to 2,346.52.
On the New York Stock Exchange, 19 stocks traded lower for every eight higher, while on the Nasdaq, the ratio was 16-8 negative.
In economic news Monday, the U.S. pending home sales index fell 1.9% to 84.6 in February from 85.9 the previous month. The index is down 17.4% from the year before.
In the afternoon, the Federal Reserve will release minutes from its Mar. 18 meeting. Traders will read the minutes closely for clues to the willingness of the Fed to continue cutting interest rates despite worries of inflation.
Oil prices surged higher by almost $3 on Monday, but on Tuesday May WTI crude oil was falling in price on the NYMEX, down 95 cents to $108.14 per barrel.
Among stocks in the news, Washington Mutual (WM) said it is receiving $7 billion in new capital from investors including private equity firm TPG. The bank, stung by mortgage losses, will slash its quarterly dividend from 15 cents to 1 cent per share and report a $1.1 billion loss in the first quarter. Also, WaMu will close all freestanding home loan offices.
Advanced Micro Devices (AMD) plans to cut 10% of its workforce. Also, the semiconductor firm warned that first-quarter sales would be lower than expected.
Apple (AAPL) was downgraded from market perform to underperform by an analyst at Morgan Keegan, who cited evidence of broad weakness in spending on consumer technology in both the U.S. and Europe.
Novellus Systems (NVLS) says first quarter revenue will be at the low end of the range it previously predicted. Earnings are expected to be 15 to 17 cents per share, down from 21 to 24 cents in previous projections.
Major European indexes were mostly lower Tuesday. In London, the FTSE 100 index fell 1% to 5,954.60. Paris' CAC 40 index fell 1.18% to 4,886.05, and Germany's DAX index lost 1.15% to 6,742.68.
Stocks also fell in Asia, with Japan's Nikkei 225 down 1.49% to 13,250.43 and Hong Kong's Hang Seng index off 1.09% to 24,311.69.
Treasury market
Treasuries were moving higher Tuesday morning. The two-year notes were up 02/32 to 99-24/32 for a yield of 1.892%; ten-year Treasuries rose 07/32 to 99-29/32 for a yield of 3.519%; and the 30-year bond gained 15/32 to 100-27/32 for a yield of 4.327%.