Closing Bell: Stocks Sink on Profit Warnings, Stimulus Pullback Fears

Charles Evans president federal reserve bank chicago stimulus bond buying interest rates wall street
Tim Boyle/Bloomberg via Getty ImagesFederal Reserve Bank of Chicago President Charles Evans.

Warnings of weaker profits and a possible pullback in the Federal Reserve's stimulus program helped pull the stock market down Tuesday, despite some positive economic news.

The major averages dropped about half a percent, though tech stocks fared a bit worse. The Dow Jones industrial average (^DJI) lost 93 points to close at 15,518, while the Standard & Poor's 500 index (^GPSC) fell 9 points to 1,697, and the Nasdaq composite index (^IXIC) slipped 27 points to 3,665.

A Federal Reserve voting member says the central bank is "quite likely" to start reducing its bond purchases later this year but that any change hinges on the economy showing improvement. Charles Evans, president of the Fed's Chicago regional bank, wouldn't give a firm answer about when the Fed would begin to scale back its $85 billion a month in bond buys. But, during an interview with reporters, he didn't rule out that result coming out of the September meeting.

Separately, another regional Fed chief said the central bank could start reducing its bond-buying program as soon as September. In an interview with Market News International, Atlanta Federal Reserve Bank President Dennis Lockhart said that while the Fed's easing back on monetary stimulus could come in September, the move could come at any time before the end of the year.

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The U.S. economy likely grew faster than initially reported in the second quarter, thanks to a sharp narrowing in the trade deficit to its lowest in more than 3½ years in June, as exports touched a record high and imports fell. The Commerce Department said the trade gap fell 22.4 percent to $34.2 billion, the smallest since October 2009. The percentage decline was the largest since February 2009.

In company news, shares of the longtime owner of The Washington Post hit five-year highs after announcing the sale of the paper to Jeff Bezos, founder and CEO of (AMZN), for $250 million. The newspaper, which unveiled a scandal that toppled a U.S. president, has been owned by one family, the Grahams, since it was acquired in a 1933 bankruptcy sale. Class B shares of the Washington Post Co. (WPO) gained 4.3 percent, to $593 Tuesday. The stock at one point hit $605.18, a level not since September 2008.

UBS (UBS) has agreed to pay about $50 million to settle federal civil charges of misleading investors in its sale of risky mortgage bonds ahead of the 2008 financial crisis, the Securities and Exchange Commission said Tuesday. The SEC said the Swiss bank failed to disclose that it had kept $23.6 million in payments it received as it acquired collateral for the mortgage-backed securities.

General Motors (GM) plans to spend another $167 million at its Tennessee factory so it can build two new midsize vehicles, which might be new versions of the Chevrolet Equinox and GMC Terrain crossover SUVs, last reworked in 2009. The spending -- on top of a previously announced $183 million investment -- is expected to create or keep 1,800 jobs, but the automaker wouldn't say how many new people would be hired. Separately, GM said it cutting the price of its gas-electric Chevy Volt by $5,000 for the 2014 model year. Prices will start at $34,995 before a $7,500 federal tax credit.

More Stocks in the News:

  • CVS Caremark (CVS) sank 3 percent, to $59.89 after the drugstore operator lowered its earnings target for the year.

  • IBM (IBM) fell 2.3 percent to $190.99 following reports that the tech giant would require some workers to take time off this month as hardware sales slow. Credit Suisse also cut its rating on the company.

  • Sony (SNE) shares erased nearly 5 percent to end at $20.72 after CEO Kaz Hirai rejected an investor proposal to spin off its entertainment unit.

  • Shares of teen retailer American Eagle Outfitters (AEO) fell 12 percent to $17.57 a day after the teen retailer slashed its second-quarter earnings outlook, citing weak sales and profit margins during the period. American Eagle's woes spread to other teen-retailer stocks, including: Abercrombie & Fitch (ANF), down 4 percent to $49.57.; Urban Outfitters (URBN), off 2.75 percent to $42.47.; and Aeropostale (ARO), down 2.3 percent to $14.60

  • Shares Regeneron (REGN) fell more than 6 percent to $254.50 after the drug developer reported second-quarter that fell short of analyst expectations.

  • Molson Coors Brewing (TAP) gained more than 6 percent to $53.26. The beverage company reported better earnings and revenue than analysts had expected, helped by sales in central Europe. Molson bought the Czech Republic-based brewer StarBev last year.

What to Watch Wednesday:

  • The Energy Information Administration releases its latest weekly report on petroleum stockpiles at 10:30 a.m. Eastern time.

  • The Federal Reserve releases June data on consumer credit at 3 p.m.

These major companies are due to report quarterly earnings statements:

  • Duke Energy (DUK)

  • Groupon (GRPN)

  • Prudential Financial (PRU)

  • Ralph Lauren (RL)

  • Tesla Motors (TSLA)

  • Time Warner (TWX)

-Compiled from staff and wire reports.