Wall Street Trims Losses As Closing Bell Nears

NEW YORK (MarketWatch) -- Wall Street on Wednesday gave back of chunk of Tuesday's record gains, pressured by Boeing's delaying deliveries of its Dreamliner plane, and fellow blue chip Alcoa, which fell short of earnings estimates.

"We're beginning to see some negative earnings reports come out," said Peter Cardillo, chief market economist at Avalon Partners.

"Percentage-wise, I would expect more disappointments than pleasant surprises, so for the next week or so we could see this market give up 3% to 5% on slower earnings growth," Cardillo said.

The Dow Jones Industrial Average was off 86.5 points fell 66 points to 14,078.0, scaling back earlier losses that had the Dow off more than 140 points.

"We had a pretty good day yesterday and we're giving up half of it; the punishment didn't really fit the crime," Art Hogan, chief market strategist at Jefferies & Co., said of the market's scaling back its earlier losses.

Of the Dow's 30 components, 19 were trading lower, led by the likes of Chicago-based aircraft maker Boeing Co. , off 2.7% , and aluminum producer Alcoa Inc. , off 3.2%. .

The S&P 500 declined 1.14 points to 1,564.01.

The Nasdaq Composite advanced 7.87 points to 2,811.78, after climbing to a high of 2,813.67 earlier on, a level unseen since early 2001.

The Nasdaq drew some support from Costco Wholesale Corp. , which was up 9% after topping forecasts with its fourth-quarter profit rise of 4.7%. .

The Dow and S&P losses one day after reaching new peaks "looks like exhaustion among the buyers," said Al Goldman, chief market strategist at A.G. Edwards. .

Volume on the New York Stock Exchange totaled more than 999 million shares, and decliners just ahead of advancers. On the Nasdaq, nearly 1.8 billion shares were exchanged, and declining stocks outran those advancing by 5 to 4.

Third-quarter earnings of S&P 500 companies have "a good chance" of turning negative for the first time in five years on Thursday, after factoring in Wednesday's profit-warnings from a slew of energy stocks, Thomson Financial said.

The third-quarter earnings growth rate is currently at 0.1%, and that's without factoring in the profit warnings from Chevron, Valero Energy and others, said John Butters, an analyst at Thomson.

However, Butters said upwards revisions from other companies could keep the growth rate positive.

Fed-inspired rise

On Tuesday, Wall Street rallied, taking the Dow and S&P to fresh closing highs after minutes from the Federal Reserve's September meeting furthered thoughts that the central bank would cut interest rates again at a two-day Federal Open Markets Committee gathering at the end of the month.

"The FOMC minutes did not shed fresh light on the Fed's monetary policy outlook, and as a result, it appears the foreign currency market remains somewhat skewed toward another rate cut at some point this year," said analysts at Action Economics.

Following Tuesday's Fed minutes, investors were also eyeing the first speech by Eric Rosengren, the new president of the Federal Reserve Bank of Boston, who told the Chamber of Commerce in Portland, Maine, that commercial and savings banks could find profitable opportunities in the subprime mortgage market.

In economic data, the Commerce Department reported inventories at U.S. wholesalers remained at the leanest levels ever in relation to sales in August, with wholesale sales up 0.4% during the month, while inventories gained 0.1%. .

In play

Agricultural company Monsanto Co. missed analysts' mean estimate in reporting fourth-quarter losses widened nearly 46%. .

Shares of Chevron Corp. fell 0.2% after the oil giant warned third-quarter earnings would fall "significantly" below the record $5.4 billion posted the prior quarter. .

Crude Awakening

Crude-oil futures edged up, holding ground above $80 a barrel, as traders focused on prdictions for a third-weekly climb in U.S. crude inventories and declines in gasoline and heating-oil supplies. Crude oil for November delivery was ahead 72 cents at $80.98. .

Gold advanced further, as the dollar continued to weaken. Gold for November delivery was up $1.80 at $744.90 an ounce. .

The dollar slipped across major counterparts except the yen.

Treasurys gained, with the benchmark 10-year note up 5/32 at 100 30/32, its yield falling to 4.636%. .

Taking stock overseas

European shares slipped in afternoon trade amid some weakness from oil and gas companies. .

In Asia, indexes advanced, with stocks in Sydney, Seoul and Shanghai finishing at record highs while Japanese indexes gained on exporters. .

By Kate Gibson