Earnings disappoint, indexes fall

U.S. stocks slumped Tuesday after some of the market's largest companies reported disappointing earnings.

Rattling the market were Microsoft, Caterpillar, and Procter & Gamble, among others. Some companies also forecast weaker results in months ahead.

An unexpected drop in U.S. orders for long-lasting goods also weighed on investors, dragging the Dow Jones industrial average down 390 points early in the day, before it pared back some of the losses. It was the biggest one-day decline for the blue-chip index since Jan. 5.

The Dow dropped 291.49 points, or 1.65 percent, to close at 17,387.21. It is now 3.7 percent below its record high of 18,053.71 on Dec. 26.

The Standard & Poor's 500 index lost 27.54 points, or 1.34 percent, to 2,029.55 - down 2.9 percent from its high of 2,090.57 on Dec. 29. The Nasdaq composite dropped 90.27 points, or 1.89 percent, to 4,681.50.

The downbeat company report cards raised concerns about corporate America's ability to increase profits at a time when many investors are expecting the resurgent U.S. economy to drive earnings should economic growth weaken overseas.

"That theme, 'Boy, this is the year earnings are going to come back,' suffered a little bit of a setback," said Sean Lynch, cohead of global equity strategy at Wells Fargo Investment Institute. "Investors are starting to worry that the stronger dollar and some of the impacts of energy aren't always positive."

Each major index opened sharply lower Tuesday as investors digested the corporate-earnings news. A report showing that sales of newly built U.S. homes accelerated 11.6 percent last month failed to reverse the market's slide.

Nine of the 10 sectors in the S&P 500 fell Tuesday, with technology stocks dropping the most. Microsoft, which reported quarterly results late Monday, led the decline among stocks in the S&P, sliding $4.35, or 9.3 percent, to $42.66.

Caterpillar wasn't far behind, shedding $6.18, or 7.2 percent, to $79.85.

Utility stocks, where investors go for safety, were the only industry group to rise.

December's 3.4 percent drop in durable-goods orders came about as demand for commercial aircraft declined. It suggests that U.S. companies may be growing wary of economic weakness in Europe and Asia, as well as the strengthening dollar, which can hurt exports.

Benchmark U.S. crude rose $1.08 to close at $46.23 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, rose $1.44 to close at $49.60 in London. Oil has been mostly falling since June, when it traded above $100.