Stocks slip in early trading after 2-day rally

NEW YORK — Stocks fell after a two-day spike as the dollar rebounded and traders awaited corporate profit reports.

The drop in early trading Wednesday comes as investors have little economic news to shape sentiment and are looking to earnings reports for the July-September quarter. Aluminum company Alcoa Inc. will be the first of the 30 companies that make up the Dow Jones industrial average to report results after the closing bell.

Earnings will provide insight into just how far any economic rebound has been so far. During the second quarter, companies largely beat modest earnings expectations by cutting costs and streamlining operations. That helped fuel the market’s rally throughout the summer.

Traders also tracked the dollar, which rose against other major currencies after sagging Tuesday following an interest rate increase in Australia. A stronger dollar can cut into profits from companies selling goods overseas.

In midmorning trading, the Dow Jones industrial average fell 31.82, or 0.3 percent, to 9,699.43. The Standard & Poor’s 500 index fell 1.24, or 0.1 percent, to 1,053.48, while the Nasdaq composite index fell 3.79, or 0.2 percent, to 2,099.78.

Now, though, investors will be looking for actual growth in revenue and sales as the driver of earnings. That would indicate companies are starting to get their footing again and consumers are back buying goods and services.

Len Blum, a managing partner at Westwood Capital LLC, said revenue growth comes down to the consumer, who is still struggling mightily as unemployment continues to rise.

“The consumer is just really damaged,” Blum said. “Every time we see a blip, it’s not sustainable.”

A report from the Federal Reserve, due at 3 p.m. EDT, is expected to show consumers likely cut their borrowing for the seventh straight month in August. Economists polled by Thomson Reuters, on average, forecast consumer borrowing fell $10 billion at an annual rate in August.

Stocks have surged in the past two days, with the Dow gaining 244 points, its best back-to-back gains since July. The resurgence comes after two straight weekly declines, the first of its kind since July.

Tuesday’s gains came as investors again rallied around signs of a global economic recovery. Australia’s central bank raised interest rates, an indication the country believes the worst part of the downturn is over.

Energy and material stocks also got a boost as commodities prices rose. Gold continued its surge into Wednesday, hitting a new record of $1,049.70 an ounce.

Meanwhile, bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.22 percent from 3.26 percent late Tuesday.

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 167.8 million shares compared with 171.4 million shares traded at the same point Tuesday.

Crude oil rose 5 cents to $70.93 per barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies fell 1.90, or 0.3 percent, to 600.08.

Overseas, Japan’s Nikkei stock average rose 1.1 percent. In afternoon trading, Britain’s FTSE 100 fell 0.6 percent, Germany’s DAX index declined 0.4 percent, and France’s CAC-40 dropped 0.4 percent.