) raised concerns about the outlook for corporate earnings and market participants took profits after market gains since the end of August, reports Standard & Poor's MarketScope.
The Dow Jones industrial average dropped 85.5 points, or 0.8%, to 10,597.44. The broader Standard & Poor's 500 index was down 9.36 points, or 0.75%, to 1,231.2. The tech-heavy Nasdaq composite index fell 11.08 points, or 0.51%, to 2,171.75, helped a bit by strength in semiconductor stocks.
In the energy markets, October West Texas Intermediate crude oil reversed course in late Nymex trading to turn lower, down 23 cents to $63.11 a barrel. Energy traders look ahead to Wednesday's release of weekly EIA inventory data to provide further direction, says Action Economics. The Street is currently expecting crude stocks to fall 1.6 million barrels in the latest reporting week, while gasoline supplies are seen down 2.4 million barrels.
Coming Wednesday is an update on retail sales, which is expected to drop 1.2% in August, while the ex-auto sales increases 0.5%. The auto component is expected to account for most of the weakness on the month, thanks to the huge drop in unit vehicle sales on the month following strength in June and July, says Action Economics. Providing a boost to the ex-auto figure, however, will be the gasoline station component, which should add 0.3%-0.4% to the headline, thanks to surging gas prices, figures Action Economics.
Wednesday's release of August industrial production is expected to increase 0.3% (median +0.2%), which would leave capacity utilization increasing to 79.9% from 70.8%, says Action Economics.
Retailers were broadly weaker on Tuesday in the wake of disappointing quarterly results from Best Buy (BBY
). The electronics retailer reported second-quarter earnings per share of 37 cents, a penny lower than the consensus estimate and up from 26 cents (adjusted) a year ago, on a 10% revenue rise. The chain now plans to open about 72 new U.S. stores during its fiscal year. It reiterated $2.07-$2.17 fiscal 2006 EPS guidance.
In other company news, Nokia (NOK
) raised its sales and earnings guidance for the third quarter due to stronger-than-expected mobile device volumes and relatively firm prices.
Ford Motor (F
) inks a deal to sell its Hertz rental car unit to an investment group for about $15 billion, including the assumption of Hertz debt.
Knight Ridder (KRI
) sees third-quarter earnings per share from continuing operations down by about 20%.
In economic news Tuesday, the
producer price index (PPI) rose 0.6% in August and the core rate, which excludes food and energy prices, was flat, after respective gains of 1.0% and 0.4% in July. On a year-over-year basis, the overall PPI surged to 5.1% (4.6% in July), but the core rate slowed to 2.4% from 2.8% in June. Energy again paced the gains, up 3.7% (19.2% year-over-year). But, car prices reversed, falling 1.3% to soften the core rate.
"The mix of data, on balance, should be good news for the U.S. markets," says Action Economics.
The consumer price index (CPI) will be reported on Thursday. Hurricane Katrina has prompted risk of a further surge in energy prices in September, says Action Economics.
The U.S. trade deficit narrowed to $57.9 billion in July, vs. expectations for a widening to $59.8 billion, from a revised $59.5 billion in June.
Treasury yields moved lower following the benign flat print in August core PPI and narrower than expected trade gap, both of which came in lower than expected. This gives the Fed a little less incentive to hike rates in coming months in the bond market's estimation, says Action Economics. The 10-year note yield fell to 4.13%.
European stock markets finished lower on Tuesday. London's Financial Times-Stock Exchange 100 index was down 37.1 points, or 0.69%, to 5,338 following report UK August CPI climbed 0.4% primarily on the back of higher transport costs from rising gasoline pump prices.
Germany's DAX index fell 88.1 points, or 1.77%, to 4,901.88 on speculation support is growing for a re-election of Chancellor Gerhard Schroeder's Social Democratic party on Sept. 18. Opposition candidate Angela Merkle, believed to be more business friendly, is seen blowing it, says Standard & Poor's MarketScope.
In Paris, the CAC 40 index lost 38.41 points, or 0.86%, to 4,453.41 following report French August CPI rose a bit more than expected 0.4% due to higher costs for clothing and shoes.
Asian markets finished mixed on Tuesday.
Japan's Nikkei 225 index closed marginally higher at 12,901.95. Stocks rose in Tokyo, led by brokerages as a bright earnings outlook from Nikko Cordial boosted sentiment. Optimism about economic growth contributed to stock market gains. The broad-based TOPIX index outperformed the tech-heavy Nikkei 225, rising 5.96 points, or 0.46%, to 1315.76.
In Hong Kong, the Hang Seng index sank 129.23 points, or 0.85%, to 15,070.56 on profit taking after recent gains. China Mobile and CNOOC led the market lower by index points, reports Standard & Poor's MarketScope.