Stocks fall after rally, profit news

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NEW YORK -- Stocks pulled back Wednesday as investors weighed profit warnings and debated the Federal Reserve's next move on interest rates.

While a retrenchment might be expected after sharp gains seen Wednesday -- the Dow Jones industrial average and the Standard & Poor's 500 index finished at new highs -- investors also faced concerns about the health of corporate profits. The likes of Alcoa Inc., International Paper Co. and Chevron Corp. also moved lower on profit news.

Economic news, a mainstay of Wall Street's diet in recent weeks as it tried to determine the likelihood of a Fed rate cut, appears to have briefly faded in import this week as the third-quarter earnings reports now trickling in have drawn investors' attention. Investors seemed unfazed by a report that inventories among U.S. wholesalers ticked up in August by 0.1%, below the 0.03% that had been expected, according to Dow Jones Newswires.

The market's uneven trading Wednesday follows a surge that came with the release of minutes from the Fed's last meeting. While some investors debated the meaning of policymakers' comments, Wall Street initially appeared pleased by the Fed's remarks. In addition, the central bank's minutes didn't indicate bankers were fretting about inflation. A spike in inflation could forestall further rate cuts.

Wall Street is trying to determine whether the Fed will make a move when it meets Oct. 30-31. Last month's decision to lower short-term interest rates by a larger-than-expected half percentage point helped stoke a recovery in stocks that had been hurt by concerns about tight access to credit and an economic slowdown.

"People are looking backward at what the Fed was discussing to try and discern whether or not we're in a recession," said Kim Caughey, equity research analyst at Fort Pitt Capital Group. "Looking in the rearview mirror isn't going to give us that clarity because its history, so instead I'm really looking forward to what corporate earnings will show."

In the first hour of trading, the Dow fell 61.45, or 0.43%, to 14,103.08 after rising 120 points on Tuesday.

Broader stock fell. The S&P 500 fell 6.96, or 0.44%, to 1,558.19, and the technology-heavy Nasdaq composite slipped 0.21, or 0.01%, to 2,803.70.

Bonds were little changed as stocks fell. The yield on the benchmark 10-year Treasury note was flat at 4.65% from late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 2 cents to $80.24 per barrel on the New York Mercantile Exchange. The Energy Department's forecast for winter demand helped support prices, but investors were still concerned that a warm winter could take futures lower.

In corporate news, Alcoa posted a 3% profit increase as revenue fell. But excluding a boost to its bottom line from the sale of a stake in a Chinese aluminum company, the aluminum producer's results fell short of Wall Street's expectations. Alcoa fell 86 cents, or 2.2%, to $38.86.

International Paper lowered its projection for how much it expects to take in from sales of land in the third quarter, news that sent shares falling 75 cents, or 2%, to $36.31.

Chevron fell $1.81 to $90.99 after the company warned that its third-quarter profit will come in well below the $5.4 billion it earned in the second quarter.

However, Wall Street also received upbeat news from companies including Costco Wholesale Corp., which reported better-than-expected results. Shares of the retailer rose $4.85, or 7.7%, to $68.16.

Declining issues outnumbered advancers by about 9 to 5 on the New York Stock Exchange, where volume came to 225.2 million shares.

The Russell 2000 index of smaller companies fell 3.45, or 0.41%, at 842.27.

Overseas, Japan's Nikkei stock average rose 0.10%. Britain's FTSE 100 fell 0.12%, Germany's DAX index was unchanged, and France's CAC-40 fell 0.42%.
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