(Updates to early afternoon)
By Kristina Cooke
NEW YORK, Oct 16 (Reuters) - U.S. stocks fell on Tuesday
after a combination of disappointing earnings from banks such
as Wells Fargo & Co <WFC.N> and soaring oil prices painted a
bleak backdrop for equities.
Oil thundered above $88 a barrel on supply worries as
tensions rose between Turkey and Kurdish separatists in
northern Iraq. Investors worried that high energy prices could
cut into consumer and business spending.
Shares of U.S. banking companies Wells Fargo & Co. and
KeyCorp <KEY.N> dropped after their profits fell short of Wall
Street's estimates as credit losses took a toll, a day after
Citigroup Inc <C.N> reported a 57 percent tumble in
third-quarter profit.
The bank earnings and comments from Federal Reserve
Chairman Ben Bernanke late on Monday and U.S. Treasury Chairman
Henry Paulson on Tuesday dashed investor hopes for a fast
resolution of the global credit problems.
Paulson and Bernanke added their voices to those warning
that the housing slump will likely hurt the U.S. economy for
some time.
"The market is struggling with a whole lot of negative
issues such as oil, the situation with Turkey and Iraq,
concerns about the earnings season, about Citigroup and
financials," said Gail Dudack, chief investment strategist at
Dudack Research Group. She added that Friday's anniversary of
the 1987 stock market crash was also making investors feel
tentative.
The Dow Jones industrial average <.DJI> was down 47.23
points, or 0.34 percent, at 13,937.57. The Standard & Poor's
500 Index <.SPX> was down 5.05 points, or 0.33 percent, at
1,543.66. The Nasdaq Composite Index <.IXIC> was down 3.88
points, or 0.14 percent, at 2,776.17.
Wells Fargo posted the smallest quarterly profit gain in
more than six years, sending its shares down 3.8 percent to
$34.60.
KeyCorp, a large Midwestern bank, posted a third-quarter
profit that fell short of estimates, triggering a 5.1 percent
slide in its stock to $30.70.
Citigroup's shares fell 2.2 percent to $45.22, as the
Philadelphia KBW Bank index <.BKX> shed 1.6 percent.
Shares of home builders also took a hit. D.R. Horton Inc
<DHI.N>, the largest U.S. home builder, fell 3.1 percent to
$13.16 after it said quarterly net orders for new homes slid 39
percent in another sign of the housing slump.
Retailers' and industrial conglomerates' -- among companies
likely to feel the heat from higher oil prices -- shares fell.
Caterpillar <CAT.N> shares dropped 1.1 percent to $77.98.
Shares of Wal-Mart Stores Inc <WMT.N>, the world's biggest
retailer, dropped 1.3 percent to $45.85 on the NYSE.
Shares of General Motors Corp <GM.N> fell 2.6 percent and
were the biggest drag on the Dow after Bear Stearns downgraded
the No. 1 U.S. automaker, saying the earnings and cash flow
gains for 2008 to 2009 from GM's new union contract will be
less than expected.
A quarterly profit shortfall from Ericsson, the world's
biggest mobile phone network maker,<ERICb.ST><ERIC.O> also
soured sentiment on tech stocks, according to analysts.
Ericsson's U.S.-listed shares sank nearly 24 percent to
$31.19 and led the list of the Nasdaq 100's <.NDX> biggest
losers. Shares of telecommunications network equipment maker
Cisco Systems Inc <CSCO.O> fell 1.7 percent to $32.24 and
ranked No. 2 among the biggest decliners in the Nasdaq 100.
U.S. oil futures <CLc1> rose 1.8 percent, or $1.52, to
$87.65 a barrel after earlier setting a record high of $88.20
on the New York Mercantile Exchange.
((Reporting by Kristina Cooke
Editing by Kenneth Barry
Reuters Messaging:
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