Market Wrap: Stocks Drop on Caterpillar, Microsoft Earnings

US Markets Face Uncertainty After Greek Elections
Andrew Burton/Getty Images
By Ryan Vlastelica

NEW YORK -- U.S. stocks closed more than 1 percent lower Tuesday as disappointing results from a number of bellwether companies pointed to weakening conditions, while an unexpected decline in durable goods orders also weighed on sentiment.

The day's losses were broad, with nine of the 10 primary S&P 500 sectors lower on the day, though tech was the biggest drag by far. The group lost 3.3 percent in its biggest one-day drop since November 2011, in the wake of results from industry bellwether Microsoft. Industrial shares fell, led by Caterpillar.

The two names were the biggest decliners on the Dow, but fellow components Procter & Gable (PG) and DuPont (DD) also tumbled.

Microsoft (MSFT) fell 9.3 percent to $42.66 a day after the main engine of its historic earnings power -- selling Windows and Office to big businesses -- showed signs of waning.

Heavy machinery marker Caterpillar (CAT) gave an outlook below expectations, warning that the recent plunge in oil prices would hurt its energy equipment business. Shares dropped 7.2 percent to $79.85.

%VIRTUAL-pullquote-There's clearly a lot of froth baked into certain areas of tech, while Caterpillar is giving tangible evidence that things can go down more than they already have.%"There's clearly a lot of froth baked into certain areas of tech, while Caterpillar is giving tangible evidence that things can go down more than they already have," said Jim O'Donnell, chief investment officer at Forward in San Francisco.

"People may not be aware of the sensitivities that heavy industrial guys have to the oil cycle, or what the ripple effects of oil's weakness will be. There are a lot of companies that are going to be adversely impacted."

With 24 percent of the S&P 500 having reported, 70.6 percent of companies have topped earnings expectations while 55.5 percent have beaten on revenue, according to Thomson Reuters data. That compares with the long-term average of 63 percent for earnings and 61 percent for revenue.

Still, many multinational companies disappointed this quarter, with the stronger dollar a common culprit. P&G was one of the companies pressured by a stronger dollar, sending shares down 3.4 percent to $86.49.

After the market closed, Apple (AAPL) rose 5.4 percent to $115 after it posted better-than-expected revenue growth, along with record sales of its iPhone line.

AT&T's revenue rose more than expected in the latest quarter. Yahoo reported its results and unveiled a plan for a tax-free spin-off of its 15 percent stake in China's Alibaba Group Holding (BABA), a first step in a highly anticipated process to unwind the holding, valued at roughly $40 billion.

Shares of AT&T (T) rose 1.8 percent to $33.40 after the bell, while Yahoo (YHOO) added 7.7 percent to $51.69.

The Dow Jones industrial average (^DJI) fell 291.49 points, or 1.65 percent, to 17,387.21, the Standard & Poor's 500 index (^GPSC) lost 27.54 points, or 1.34 percent, to 2,029.55 and the Nasdaq composite (^IXIC) dropped 90.27 points, or 1.89 percent, to 4,681.50.

Adding to the day's weakness, a gauge of U.S. business investment plans unexpectedly fell in December, another sign that slowing global growth and falling crude oil prices were having an impact on the economy.

On the plus side, consumer confidence posted its highest reading since August 2007. That helped indexes recover from their lows of the session; the Dow earlier fell as much as 2.2 percent.

Declining issues outnumbered advancing ones on the NYSE by 1,726 to 1,337, for a 1.29-to-1 ratio; on the Nasdaq, 1,710 issues fell and 1,029 advanced, for a 1.66-to-1 ratio favoring decliners.

The S&P 500 posted 41 new 52-week highs and 10 new lows; the Nasdaq composite recorded 57 new highs and 49 new lows.

What to watch Wednesday:
  • Federal Reserve policymakers meet to set interest rates and release statement at 2 p.m. Eastern time.
These selected companies are scheduled to release quarterly financial results:
  • ADT (ADT)
  • Ameriprise Financial Services (AMP)
  • Anthem (ANTM)
  • Biogen Idec (BIIB)
  • Boeing (BA)
  • Brinker International (EAT)
  • Energizer Holdings (ENR)
  • Facebook (FB)
  • Fiat Chrysler (FCAU)
  • General Dynamics (GD)
  • Hess (HES)
  • International Paper (IP)
  • McCormick & Co. (MKC)
  • Praxair (PX)
  • Progressive (PGR)
  • Qualcomm (QCOM)
  • T. Rowe Price (TROW)
  • Tupperware Brands (TUP)
  • Vertex Pharmaceuticals (VRTX)
12 PHOTOS
10 Ways to Teach Your Kids to Be Frugal
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Market Wrap: Stocks Drop on Caterpillar, Microsoft Earnings
Children watch what you do, and they learn by example. Without getting into too much detail, show them how you handle your money so they can see the way it should be done. When you plan the family vacation, share with them how you're deciding where to go based on what you can afford. When it's time to go school clothes shopping, explain how you can buy them one just really expensive pair of sneakers or the cheaper pair plus other stuff like that cool new backpack.
We live in a world where we expect things can make us happy. Help your kids understand that experiences -- seeing the world, exploring and learning, spending time with loved ones -- are so much more important than any stuff could be. Nurture their creativity. Feed their curiosity. Make their lives rich with experience, and they'll learn to be content no matter how much money they have.
You don't need to break the bank to have a good time. Help your kids understand that a frugal life doesn't have to be a boring life by choosing entertainment options that are high in fun but low in cost. It costs nothing to walk through a local park and plan a nature treasure hunt. It costs nothing to give your kids a trunk full of your old clothes and makeup and let them play dress-up. It costs nothing to set up a tent in the backyard and let them "camp out" for the night. Focus on fun that's creative, interactive, and physical. Your kids will learn you don't need to spend a ton of money to have a good time.
Making your kids work, in exchange for money, helps them understand that money "doesn't grow on trees" and that Mom and Dad aren't their personal ATM. Budgeting their allowance also teaches the importance of good stewardship of their money; when they know they've only got so many dollars for the week, they're more likely to think twice about whether that candy bar or comic book is really worth purchasing. They also learn to make tradeoffs: they can afford either the comic book or the candy bar, but not both.
When you give your kids their allowance each week, help them divide it into three jars: One for spending money, which they can use right now on anything they want, one for savings, which means putting it aside for things they'll want in the future, and one for giving to a cause of their choice, like animals, the environment, or childhood cancer. Help your children develop the habit of saving for a goal, such as a big toy, a trip to Chuck E. Cheese or a new video game. This will help them learn delayed gratification and the importance of putting money aside.
Frugality isn't about saying "no" all the time; it's about making the most of the money you've got. Help your kids understand this by turning it into a fun game. When you go grocery shopping, challenge them to find the cereal that's the least expensive. When it's time to plan their birthday party, tell them you're willing to spend so many dollars and work with them to plan a fun bash within that budget.
Kids love helping out with grownup tasks. If you're fixing the pipes under the sink, ask your child to hand you tools and explain what you're doing as you work. If you're washing the car, let them lend a hand. If you're planting a veggie garden, ask them to pull weeds or water the plants. Use these moments to teach them the value of fixing things yourself and putting in a little elbow grease. And if your child is extra-helpful, give them a bonus –- and help them put that money into the savings jar.
Reduce, reuse and recycle. We live in a throwaway society where we're always looking for the newest gadget and tossing things in the trash the instant they show a sign of wear. Teach your kids the value of making things last and reducing waste by doing things like mending clothes when they rip and turning old milk cartons and egg containers into arts and crafts.
Help your kids to understand the gimmicks and false promises advertisers use to try to entice you into buying their products. Once they understand how advertising ropes us in, they'll be less susceptible to ads and marketing.
Every kid has said, at one point or another, that they "really need" something because all their friends have it, or they saw it on TV, or any number of other reasons. Gently correct your child when they use this language and explain the difference between something you really, truly need and something you merely want. Help them to understand that money should first be spent on needs, and that you can't expect to get everything that you want.
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Markets

NASDAQ 6,422.69 -38.63 -0.60%
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USD (per EUR) 1.20 0.00 0.09%
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