The Dow Jones industrial average closed down 92.59, or 0.9%, at 10,609.92.
The broader gauges also closed lower. The Nasdaq composite index closed down 37.79, or 1.8%, at 2,116.04. The Standard & Poor’s 500 index closed down 11.32, or 1%, at 1,144.05.
US investors intent on preserving profits looked past positive earnings reports today and sent Wall Street stocks sharply lower.
After the previous session’s rally, when the Dow Jones industrial average reached its highest level in 31 months, not even solid results from five blue chip companies could stop the declines.
A consumer confidence report which missed expectations, and jitters about the Federal Reserve’s expected statement on interest rates tomorrow contributed to the decline.
Nevertheless, with results from most companies beating Wall Street’s forecasts, most traders and analysts remained optimistic about the long term.
“We’re still in a good environment, we’re still in an upward trend,” said Todd Leone, managing director of equity trading at SG Cowen Securities. “I like to see us go down a little bit, actually, it’s healthy. You don’t want to see the market going in a straight line up. “
Strong corporate earnings, encouraging economic data and an expression of confidence about the job market by Fed chairman Alan Greenspan helped all the major indexes reach significant highs yesterday.
While some investors were locking in gains today, others were keeping a close eye on the Fed meeting.
With a weak jobs picture and low inflation, most economists believe policy makers will keep interest rates at their current low levels.
Separately, the Conference Board reported today that its consumer confidence index rose in January to its highest level since mid-2002.
The business group said the index rebounded to 96.8 following a dip in December to a revised reading of 91.7. Still, it missed the 99.0 reading forecast by analysts.
The economic data, along with an avalanche of earnings results coming in this week from more than 130 companies in the S&P 500, is a lot for investors and financial professionals to digest, said Bill Meade, managing director for RBC Capital Markets. That can translate to volatility in the marketplace.
“Things get a little crazy during reporting season,” Meade said. “But it’s evident to me that one day does not a trend make.”
On the Dow, chemical company DuPont was closed down 50 cents at 42.58 despite beating analyst expectations and issuing an upbeat outlook for the year.
Caterpillar closed down 3.01 at 82.00, despite beating estimates with rising volume and prices in its machinery and engines segments and raising its sales forecast.
SBC Communications shed 74 cents to close at 25.95 after reporting a drop in profits on falling revenue and rising pension expenses. Results from the US’s second-largest local phone provider matched expectations.
Among the Dow’s gainers, Merck & Co. closed up 16 cents at 47.36 after reporting lower profits and sales for the fourth quarter, partly due to restructuring costs and a new US wholesaler distribution programme.
Merck’s results and outlook for the year matched analyst expectations.
And McDonald’s closed up 17 cents at 25.45 after posting a modest profit for the fourth quarter, in line with expectations.
The fast food retailer, in the midst of a restructuring, posted strong sales and operating results late yesterday, showing no ill effects from the discovery of a case of mad cow disease in the United States.
Other advancers included Xerox, which rose 1.20, or 8.6%, to close at 15.15, after strong sales of new products and cost cutting helped the copier and printer company beat expectations.
On the Nasdaq, Novellus Systems closed down 5.85, or 15%, at 34.40, after reporting profits that beat its own estimates and Wall Street’s expectations, but a weaker outlook for the year.
The Russell 2000 index, which tracks smaller company stocks, was down 6.33, or 1%, at 595.17.