Stocks turn lower on anxiety over earnings

NEW YORK (AP) -- Wall Street extended its losses Tuesday, sending the Dow Jones industrials down for a fifth straight session as worries about the recession's impact on corporate profits dogged the market.

Investors shied away from placing big bets after aluminum giant Alcoa Inc. reported late Monday that it lost $1.19 billion during the fourth quarter as demand for aluminum plunged. Investors saw the report as a troubling example of the range of companies being hit hard by the recession.

"Alcoa is a harbinger of things to come," said Jeff Buetow, senior portfolio manager at Portfolio Management Consultants. "It was a horrible report."

The market got some upbeat news that lent support to stocks early in the day before sellers re-entered the market. The Commerce Department said the trade deficit fell to its lowest level in five years. The deficit narrowed 28.7 percent to $40.4 billion in November from $56.7 billion in October as demand for oil dropped by a record amount.

Though demand for imports has dropped, investors are more concerned by the waning need for American products overseas as economies around the world suffer. The fear is that as companies struggle with falling global demand, it will be more difficult for the economy to rebound.

Questions about corporate earnings are likely to dominate trading in the coming weeks. Investors are watching closely for companies' expectations for business conditions in 2009. Computer chip maker Intel Corp. and drug company Genentech Inc. are among the companies reporting results this week.

The market also will get an earlier-than-expected reading on the financial sector this week when JPMorgan Chase & Co. reports earnings on Thursday - nearly a week ahead of schedule. Investors are fearful of another year of multibillion dollar losses among financial companies, as analysts forecast mounting problems in credit card and commercial real estate portfolios.

Meanwhile, Citigroup Inc. and Morgan Stanley are expected to announce a deal soon to combine their brokerage operations as Citi struggles to raise additional cash.

"We're sort of in a wait-and-see mode," said Carl Beck, partner at Harris Financial Group. "The optimism that we saw at the beginning of the year has sort of been put on hold as people await earnings reports over the next couple of weeks."

In early afternoon trading, the Dow fell 75.66, or 0.89 percent, to 8,398.31.

Broader indexes also fell. The Standard & Poor's 500 index fell 6.90, or 0.79 percent, to 863.36, while the Nasdaq composite index fell 8.26, or 0.54 percent, to 1,530.53.

The Russell 2000 index of smaller companies fell 0.16, or 0.03 percent, to 468.64.

Losing stocks outnumbered gainers by about 8 to 7 on the New York Stock Exchange, where volume came to 652.8 million shares.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.32 percent from 2.31 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.12 percent from 0.06 percent late Monday.

The dollar was mixed against other major currencies, while gold prices advanced.

Light, sweet crude slipped 17 cents to $38.91 on the New York Mercantile Exchange after tumbling 8 percent Monday.

The Dow fell for a fourth straight session on Monday on fear that corporate profit reports will signal a recovery in the economy is further off than originally anticipated. The blue chips shed 125 points, and broader stock indexes fell more than 2 percent. The market's retreat Monday followed its worst week since November. However, stocks are still up sharply from their lows of Nov. 20.

Beck said while investors know fourth-quarter earnings will be bad they remain skittish.

"You've got the lingering shroud of doubt in people's minds, 'Is it going to be worse than already lowered expectations?'" he said.

On Tuesday, Federal Reserve Chairman Ben Bernanke said the stimulus package being crafted by President-elect Barack Obama and Congress could provide a "significant boost" to the sinking economy. During a speech in London, he also said "more capital injections and guarantees may become necessary" to stabilize financial markets and spur more lending. Obama is pushing for an economic stimulus that includes big tax cuts and has an estimated price tag of about $800 billion.

Also Tuesday, the House Financial Services Committee scheduled a hearing on the financial bailout fund in advance of legislation proposed by committee Chairman Barney Frank, D-Mass., that would place tough restrictions on recipients of the money and require spending to reduce mortgage foreclosures.

Obama on Monday asked President George W. Bush to request the money so that it can be at the ready when Obama takes office next week. Bush agreed to notify Congress. Obama said he would fundamentally change the way the remaining funds are allocated. He said some relief would be directed toward housing and small business.

Among energy stocks, Exxon Mobil Corp. rose $1.33 to $77.85, while Chevron Corp. rose $1.03 to $71.85.

Tech stocks also rose. Dell Inc. rose 9 cents to $10.74, while Microsoft Corp. rose 29 cents to $19.76.

Asian markets tumbled, hurt by reports that Sony Corp. is sinking into its first yearly operating loss in 14 years on declining sales for digital cameras, flat-panel TVs and other gadgets. Japan's Nikkei stock average fell 4.79 percent. Hong Kong's Hang Seng index dropped 2.17 percent.

Britain's FTSE 100 fell 0.61 percent, Germany's DAX index fell 1.75 percent, and France's CAC-40 declined 1.49 percent.

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