U.S. Stocks Slide As Procter & Gamble Cuts Profit Outlook

NEW YORK (MarketWatch) -- U.S. stocks fell Tuesday amid speculation the Federal Reserve might not cut interest rates after all and as Procter & Gamble forecast that rising cost of goods would dent the consumer-products giant's profit in the current quarter.

Trading lower at the open, stocks solidified their losses after the Conference Board reported U.S. consumer confidence fell to a two-year low, with employment worries a key concern.

The Dow Jones Industrial Average fell 49.7 points to 13,820.56, with 19 of its 30 components trading lower. P&G led the Dow's decline, its stock off 4%.

The company failed to match analysts' expectations in reporting income for the fiscal first quarter ended Sept. 30 and said rising energy and commodities prices would harm P&G's bottom line.

Adding to the bearish sentiment was speculation that another interest-rate cut is less than a sure thing as the Federal Reserve convenes a two-day meeting on the economy and monetary policy.

According to The Wall Street Journal, Fed policymakers are deliberating whether to cut rates by a quarter of a percentage point or to take no action.

The S&P 500 shed 7.85 points to 1,533.13, with the Nasdaq Composite declining 4.24 points to 2,813.20.

Volume on the New York Stock Exchange came to 526 million, with declining stocks topping those advancing 3 to 2. On the Nasdaq, volume topped 954 million, and decliners beat advancing issues nearly 2 to 1.

"While it seems a rate cut is probable, Wednesday's decision could go either way," wrote A.G. Edwards equity analysts Stuart Freeman and Scott Wren.

Stocks have climbed in recent days on investors' thinking that the central bank would trim benchmark loan rates by a quarter of a point or more, following up on its half-point reduction in September.

Illustrating the view is trade of federal fund futures on the Chicago Board of Trade, which have priced in a 98% chance that the Fed would trim by a quarter of a point, to 4.5%.

The Federal Open Market Committee is expected to unveil any move concerning rates Wednesday afternoon.

Meanwhile, in its fastest monthly decline in its seven-year history, the latest Case-Shiller price index found home prices in 20 major cities dropped 4.4% in the 12 months through August. .

In corporate news, Merrill Lynch & Co. said Stan O'Neal is retiring from the Wall Street firm, less than a week after it reported more than $2 billion in third-quarter losses.

Merrill's stock was recently down 3.7%.

Also in the financial sector, Swiss banking giant UBS AG reported third-quarter losses of $713 million, and said it would probably not return to profitability in the next quarter.

Its U.S.-listed shares fell 0.3%.

Also moving lower, shares of U.S. Steel Corp. fell 6.3% after the largest U.S. steel producer reported a drop in third-quarter profit and forecast a further earnings retreat in the December period.

Shares of Colgate-Palmolive Co. advanced 2.3% after the household-products maker reported a 22% rise in third-quarter profit. .

On the New York Mercantile Exchange, crude-oil futures traded down $1.56 to stand at $91.97 a barrel, while gold futures dropped $5.30 to $787.30 an ounce.

In related talk, Bear Stearns analysts told a conference call that an expected quarter-point rate cut from the Fed could propel gold prices past the $800 an ounce mark within a week.

Overseas activity

In London, shares weakened modestly amid mixed earnings reports.

Asian stocks closed mixed, with Hong Kong extending its record run on the back of China-related financials, while exporters pulled Japan's main index lower. .

By Kate Gibson