Stocks fall on Fed worries, earnings

By Melinda Peer, TheStreet

Updated at 12:13 p.m. ET

Stocks slumped Thursday as investors showed caution amid uncertainty surrounding the Federal Reserve’s potential plan to boost the economy.

At 12:13 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 56 points, or 0.5%, at 11,070. The S&P 500 ($INX) was down by 3.5 points, or 0.3%, at 1,179. The Nasdaq ($COMPX) was falling by 11 points, or 0.5%, to 2,492.

The Wall Street Journal reported Wednesday that the Fed was likely to purchase hundreds of billions of dollars of Treasurys to lower long-term interest rates and bolster the recovery. The estimate was lower than some forecasts and less than the $2 trillion of purchases the Fed enacted during the financial crisis, creating doubt among investors that the measures will be large enough to be effective.

"Expectations were very high for significant and immediate easing," said Mike Schenk, senior economist at the Credit Union National Association. "Those expectations have come down, and rightly so, the Fed wasn’t going to go in with guns blazing."

Investors sought safety in gold and Treasurys. The December gold contract added $21.60 to $1,344.20 an ounce. The benchmark 10-year Treasury note strengthened 16/32, diluting the yield to 2.670%.

Stocks surged earlier on news that initial weekly claims fell by 21,000 to 434,000 in the week ended Oct. 23, the lowest level in three months. Economists had expected claims to rise by 6,000.

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The decline "doesn't change the fundamental outlook for the jobs market," Schenk said. "Consumers are still behaving cautiously and in the mode of deleveraging."

Although a falling U.S. dollar helped lift basic materials shares, weakness across conglomerates, transportation and tech stocks weighed on the market. 3M (MMM) and Cisco Systems (CSCO) were the Dow's biggest laggards, while American Express (AXP) and Merck (MRK) had the strongest gains.

Shares of 3M (MMM) were falling 4.5% to $86.32 after the company predicted it would earn as much as $5.74 a share this year, less than the earlier forecast of $5.80. The company's third-quarter earnings of $1.53 a share beat estimates by 2 cents. 

Exxon Mobil (XOM) reported better-than-expected​ adjusted earnings of $1.44 a share, topping estimates of $1.39. Revenue rose to $95.3 billion from $82.3 billion, which missed expectations for $98.1 billion. The stock was adding 1.5% at $66.61.

Shares of Motorola (MOT) were rising 6.1% to $8.58 after the company reported a third-quarter adjusted profit of 16 cents a share, topping expectations for earnings of 11 cents a share. Strong Android phone sales helped revenue rise 6% to a better-than-expected​ $5.8 billion.

Shares of Potash Corp. of Saskatchewan (POT) were falling 2.7% to $143.32 on concerns about BHP Billiton's (BHP) hostile bid to buy the company. Potash's third-quarter profit of $1.32 a share beat expectations of $1.16. Sales of $1.58 billion surpassed revenue expectations for $1.3 billion.

Dow Chemical (DOW) shares were falling 1.1% to $30.87 after the company reported third-quarter earnings of 54 cents  a share, beating estimates.

Colgate-Palmolive (CL) shares were down 1% at $74.75 after the consumer goods company's third-quarter sales of $3.94 billion missed expectations for $4.03 billion. The company's $1.21 per-share profit beat estimates and it forecast double-digit earnings growth for the year.

Drugmaker AstraZeneca (AZN) said its quarterly profit dropped after it set aside nearly half a billion dollars to settle claims of harmful side effects related to one of its anti-psychotic drugs. AstraZeneca shares were falling 1.5% to $50.17.

Microsoft (MSFT) will report quarterly earnings after the market closes. Analysts expect to see a profit of 55 cents a share, according to Briefing.com. The software maker's shares were rising 0.6% to $26.23.

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.7%.

Crude oil for December delivery was gaining 10 cents at $82.04 a barrel.

The FTSE in London and the DAX in Frankfurt were gaining 0.4%. Hong Kong's Hang Seng climbed 0.2%, while Japan's Nikkei slipped 0.2%.

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