Disappointing earnings from Apple dragged the S&P 500 and Nasdaq down on Wednesday after initial optimism over hopes for more Fed action buoyed the markets in early morning trading.
Apple Inc results fell short of Wall Street's expectations as the European economy sagged and consumers held off buying its flagship iPhone ahead of a new version expected in the fall. Apple's stock lost 4.8 percent to $572.04.
The Dow advanced slightly following stronger-than-expected earnings from Caterpillar and Boeing .
"We had a little bounce this morning on the Caterpillar and Boeing news. A little positive news certainly set the day off right, but certainly hard to sustain, given that there was competing negative news," said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
Both the Dow and the S&P 500 had received a lift at the start of Wednesday's session from a report in The Wall Street Journal on Tuesday afternoon that Federal Reserve officials are moving closer to taking more steps to aid the flagging economy. Expectations that the Fed will act, maybe as soon as its rate-setting meeting next week, have been growing. Tuesday's story, while nothing new, helped cement that view.
On the earnings front, Caterpillar's quarterly profit easily beat Wall Street's expectations, helped in part by growing sales of mining equipment. The world's largest maker of construction machines also raised its 2012 forecast. Caterpillar's stock rose 0.8 percent to $82.06. Earlier, it hit a session high at $85.42.
Boeing reported a greater-than-expected increase in second-quarter profit and raised its full-year earnings forecast on Wednesday as rising airplane deliveries offset higher pension costs. Boeing's stock gained 2.2 percent to $73.63.
Ford Motor Co . reported a better-than-expected second-quarter profit on Wednesday, but roughly doubled its forecast for losses in Europe, where a deepening economic crisis pushed the auto industry's sales to their lowest level in nearly 20 years. Ford shares slid 0.9 percent to $8.98.
The Dow Jones industrial average <.DJI> gained 41.70 points, or 0.33 percent, to 12,659.02. But the Standard & Poor's 500 Index <.SPX> <.INX> slipped 2.14 points, or 0.16 percent, to 1,336.17. The Nasdaq Composite Index <.IXIC> dropped 9.36 points, or 0.33 percent, to 2,853.63.
The S&P 500 is testing support at its 50-day moving average at 1,332.73. The benchmark index broke through that level on Tuesday, but rebounded above it after the Wall Street Journal's story that the Fed was likely to provide more stimulus.
Housing stocks ranked among the worst performers after data from the Commerce Department showed the biggest drop in U.S. single-family home sales in more than a year. The PHLX housing sector index <.HGX> tumbled 2.1 percent, pulled down by a 2.2 percent drop in D.R. Horton shares to $18.26.
Of the 195 companies in the S&P 500 that have reported earnings to date for the second quarter, 64.6 percent have reported earnings above analysts' expectations.
Wall Street has sold off for three straight days on fears that Spain may need a bailout and signs that the global economy is starting to slow down. Despite the pessimism, the S&P 500 is up 6.3 percent this year, and is one of the best-performing broad stock indexes in the world.
(Reporting by Anna Louie Sussman; Editing by Jan Paschal)