MARKET REPORT

Stocks drop on mixed earnings

NEW YORK -- U.S. stocks fell broadly Tuesday as investors found little to cheer in corporate earnings reports. A plunge in Twitter led Internet companies sharply lower.

The Standard and Poor's 500 index dropped 16.94 points, or 0.9 percent, to 1,867.72. The Dow Jones industrial average fell 129.53 points, or 0.8 percent, to 16,401.02. The Nasdaq composite dropped 57.30 points, or 1.4 percent, to 4,080.76.

Twitter shares dropped 18 percent after company insiders were allowed to sell stock for the first time since the initial public offering last year. Netflix fell 5 percent, Facebook and Amazon dropped 4 percent each, and Google was down 2 percent.

Nine of the 10 industry groups in the S&P 500 fell, led by a 1.4 percent drop in financial companies after results for insurer American International Group fell short of analysts' expectations. Home builder stocks dropped after more signs of weakness in the housing market.

Jack Ablin, chief investment officer of BMO Private bank, said investors are worried that corporate results over the next few quarters will not justify the surge in prices from the start of 2013.

"We ran ahead of fundamental valuations, based on revenue and earnings," Ablin said. "Either revenue or earnings have to catch up to the market, or prices have to come down."

Even utilities -- the biggest winners so far this year, up 12 percent -- did not escape the selling. They slipped 0.5 percent.

The drop in the S&P 500 and the Dow Jones index was the third in four trading days and comes despite recent upbeat news on the U.S. economy. Payrolls increased by 288,000 last month, the fastest pace since 2012.

Steven Ricchiuto, chief economist of Mizuho Securities, noted that, for all the job gains, wages for U.S. workers have not increased significantly, and that is holding back consumer spending.

"People are getting weary of the 'things-are-getting-better' story," Ricchiuto said. "We're hiring more workers, but we're not paying them more."

Companies in the S&P 500 index are expected to have increased earnings by 2.6 percent in the first quarter, according to S&P Capital IQ, a data provider. That is down sharply from the nearly 8 percent jump in the fourth quarter.

Investors were keeping an eye on the turmoil in Ukraine. In the city of Donetsk, pro-Russia militants armed with automatic rifles and grenade launchers surrounded an Interior Ministry base. And a planned weekend referendum by pro-Russia insurgents for autonomy and independence in parts of eastern Ukraine was denounced as "bogus" by President Barack Obama's administration.

U.S. government bond prices rose slightly. The yield on the 10-year Treasury note fell to 2.59 percent from 2.61 percent Monday. The yield has fallen from 3 percent at the start of January.

Shares of Office Depot soared 66 cents, or 16 percent, to $4.83 after reporting adjusted profits for the first quarter that were twice as high as analysts expected. The company also said it would close at least 400 U.S. stores after its merger with OfficeMax resulted in the overlap of retail locations.

Whole Foods Market fell $7.07, or 15 percent, to $40.83 in after-hours trading. Quarterly profit at the upscale grocer fell short of expectations as rivals have sped up their own organic and natural offerings. The company also cut its profit outlook for the rest of the year.

Business on 05/07/2014

Upcoming Events