Stocks fall after 2-day rally as earnings loom

NEW YORK — Investors waiting for earnings reports to start in earnest sent stocks modestly lower Wednesday following a two-day spike.

Industrial, material and technology stocks fell sharply, while financial shares rose.

With little economic news to shape sentiment, investors are keenly focused on earnings reports for the July-September quarter for more clues about the economy. Aluminum maker 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.

“Investors are holding tight here,” said Eric Ross, director of research at Canaccord Adams. “There are people on both sides of the fence. A lot of people think this market is going to keep running and running and then others that are very nervous.”

With the benchmark Standard & Poor’s index up 55.9 percent since hitting a 12-year low in March, investors have been questioning whether a continued advance is justified given recent evidence that the economy’s recovery will be rocky.

Even with big gains on Monday and Tuesday, the S&P 500 index has given up 1.6 percent over the past two weeks as encouraging trends in labor and manufacturing faltered. How the earnings reports fare in coming weeks will largely determine the direction of the market through the end of the year, Ross said.

Many companies beat modest earnings expectations in the second quarter by cutting costs, helping to fuel the market’s rally through the summer. Now investors are hoping to see stronger sales driving earnings, which would signal a rebound in consumer spending. Many analysts are skeptical about how strong that spending will be.

“The consumer is just really damaged,” said Len Blum, a managing partner at Westwood Capital LLC. “Every time we see a blip, it’s not sustainable.”

In late afternoon, the Dow Jones industrials fell 28.72, or 0.3 percent, to 9,702.53. The Standard & Poor’s 500 index slipped 0.45, or less than 0.1 percent, to 1,054.27, while the Nasdaq composite index fell 0.26, or less than 0.1 percent, to 2,103.31.

Among the earnings reports trickling in Wednesday, Costco Wholesale Corp. said profits fell 6 percent, partly due to a stronger dollar and increased employee benefit costs, but results still beat analysts’ expectations. Shares rose $1.03 to $58.96.

Monsanto Co., the world’s biggest seed maker, said its loss widened to $233 million as revenue fell. Adjusted earnings narrowly beat estimates. Shares fell $1.21 to $74.15.

Alcoa’s shares rose 10 cents to $13.99 ahead of its report.

In other trading, shares of Verisk Analytics Inc. shot up 22.8 percent in their market debut, adding $5.02 to $27.02. The insurance data specialist raised $1.9 billion in one of the year’s largest initial public offerings.

Gold continued to edge higher after hitting a new high of $1,049 an ounce overnight. Prices rose $3 to $1,042.

Oil fell $1.31 to settle at $69.57 per barrel on the New York Mercantile Exchange after the government reported that crude inventories fell last week. Gasoline supplies grew.

A falling dollar and rising commodity prices helped push stocks higher on Tuesday, adding to the previous day’s gains that were spurred by signs of growth in the service industry. The Dow rose 244 points over two days, its best back-to-back advance since July. The resurgence came after two straight weekly declines, also for the first time since July.

Investors have been keeping a close eye on the dollar, which has fallen steadily this year amid rock-bottom interest rates and massive government spending. A weak dollar is good for corporate profits of companies with a strong global footprint, as it encourages overseas companies to buy U.S. goods and services. Over the long term, however, a weak dollar could trigger inflation.

The dollar rebounded slightly Wednesday against the euro and the British pound after tumbling the day before on a surprise interest rate increase in Australia. Higher interest rates can boost a country’s currency.

Bond prices rose after an auction of 10-year notes attracted strong demand. The yield on the 10-year Treasury note fell to 3.18 percent from 3.26 percent late Tuesday.

Four stocks fell for every three that rose on the New York Stock Exchange, where volume came to 770.4 million shares compared with 884.9 million at the same time on Tuesday.

The Russell 2000 index of smaller companies fell 1.64, or 0.3 percent, to 600.34.

Overseas, Britain’s FTSE 100 fell 0.6 percent, Germany’s DAX index slipped 0.3 percent, and France’s CAC-40 lost 0.4 percent. Japan’s Nikkei stock average rose 1.1 percent.