US stocks fall in cautious trading

US investors grew more cautious today, sending stock prices moderately lower despite better-than-expected profits from Sears and United Technologies.

The declines, which erased an early advance, signalled that investors were pacing themselves and waiting for more earnings results before making any major commitments to stocks. Analysts said investors were also mindful of the ongoing possibility of war with Iraq.

“We have a lot more to go. There is a lot more of the (earnings) reporting season ahead of us. The market is just going to crank its way through the next three or four weeks,” said Tony Cecin, director of institutional trading at US Bancorp Piper Jaffray in Minneapolis.

After gaining as much as 82.34 earlier, the Dow Jones industrial average closed down 24.27, or 0.3%, 8,698.91. On Wednesday, the Dow dropped 119.44 on a mixed earnings report from Intel and a reduced outlook from DuPont.

The market’s broader gauges also retreated. The Nasdaq composite index fell 14.43, or 1%, to 1,424.37. The Standard & Poor’s 500 index declined 3.53, or 0.4%, to 914.69.

Analysts said investors were also worried about the possibility of war with Iraq following news that United Nations inspectors found 11 empty chemical warheads at an ammunition storage area.

Microsoft declined 81 cents to 55.46 ahead of its fiscal second-quarter earnings report due out after the close of trading. IBM fell 1.54 to 86.05 ahead of its fourth-quarter results also due out later.

Analysts attributed the weakness of Microsoft and IBM, both Dow components, and of the market in general to recent earnings news that confounded investors.

After the market closed on Tuesday, Dow industrial Intel reported better-than-expected earnings but also said it was reducing capital spending this year by roughly 1 billion. The chip maker traded lower today, down 15 cents at 17.20, adding to Wednesday’s 44-cent loss.

News was also mixed on Yahoo!, which late on Wednesday posted quarterly earnings of 8 cents a share, surpassing analysts’ forecast for a 6-cent profit and beating last year’s 2-cent loss. But today, Credit Suisse First Boston downgraded Yahoo! on concerns the stock was overvalued and the Internet company fell 83 cents to 18.75.

But some earnings results helped stave off larger declines. Sears climbed 1.88 to 28.58 after posting fourth-quarter profits that beat analysts’ expectations by 20 cents a share.

United Technologies, another Dow stock, soared 1.81 to 66.21 on earnings that exceeded Wall Street’s estimates by 2 cents a share.

Advancing issues still managed to claim a narrow lead over decliners on the New York Stock Exchange where volume was light.

The Russell 2000 index, which tracks smaller company stocks, fell 0.64, or 0.2%, to 394.89.