US stocks closed more than 1 percent lower on Tuesday as disappointing results from a number of bellwether companies pointed to weakening conditions, while an unexpected decline in durable goods orders also weighed on sentiment.
The day’s losses were broad, with nine of the 10 primary S&P 500 sectors lower on the day, though tech was the biggest drag by far. The group lost 3.3 percent in its biggest one-day drop since November 2011, in the wake of results from industry bellwether Microsoft. Industrial shares fell, led by Caterpillar.
The two names were the biggest decliners on the Dow, but fellow components Procter & Gable and DuPont Co also tumbled.
Microsoft fell 9.3 percent to USD 42.66 a day after the main engine of its historic earnings power – selling Windows and Office to big businesses – showed signs of waning.
Heavy machinery marker Caterpillar gave an outlook below expectations, warning the recent plunge in oil prices would hurt its energy equipment business. Shares dropped 7.2 percent to USD 79.85.
“There’s clearly a lot of froth baked into certain areas of tech, while Caterpillar is giving tangible evidence that things can go down more than they already have,” said Jim O’Donnell, chief investment officer at Forward in San Francisco.
“People may not be aware of the sensitivities that heavy industrial guys have to the oil cycle, or what the ripple effects of oil’s weakness will be. There are a lot of companies that are going to be adversely impacted.”
With 24 percent of the S&P 500 having reported, 70.6 percent of companies have topped earnings expectations while 55.5 percent have beaten on revenue, according to Thomson Reuters data. That compares with the long-term average of 63 percent for earnings and 61 percent for revenue.
Still, many multinational companies disappointed this quarter, with the stronger dollar a common culprit. P&G was one of the companies pressured by a stronger dollar, sending shares down 3.4 percent to USD 86.49.
After the market closed, Apple Inc rose 5.4 percent to USD 115 after it posted better-than-expected revenue growth, along with record sales of its iPhone line.
AT&T Inc’s revenue rose more than expected in the latest quarter. Yahoo Inc reported its results and unveiled a plan for a tax-free spin-off of its 15 percent stake in China’s Alibaba Group Holding Ltd, a first step in a highly-anticipated process to unwind the holding, valued at roughly USD 40 billion.
Shares of AT&T rose 1.8 percent to USD 33.40 after the bell, while Yahoo added 7.7 percent to USD 51.69.
The Dow Jones industrial average fell 291.49 points, or 1.65 percent, to 17,387.21, the S&P 500 lost 27.54 points, or 1.34 percent, to 2,029.55 and the Nasdaq Composite dropped 90.27 points, or 1.89 percent, to 4,681.50.
Adding to the day’s weakness, a gauge of US business investment plans unexpectedly fell in December, another sign that slowing global growth and falling crude oil prices were having an impact on the economy.
On the plus side, consumer confidence posted its highest reading since August 2007. That helped indexes recover from their lows of the session; the Dow earlier fell as much as 2.2 percent.
About 6.5 billion shares traded on all US platforms, according to BATS exchange data, below the month-to-date average of 7.2 billion.
Declining issues outnumbered advancing ones on the NYSE by 1,726 to 1,337, for a 1.29-to-1 ratio; on the Nasdaq, 1,710 issues fell and 1,029 advanced, for a 1.66-to-1 ratio favoring decliners.
The S&P 500 posted 41 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 57 new highs and 49 new lows.