NEW YORK (CNN/Money) -
The Nasdaq tumbled Tuesday, breaking a three-session winning streak amid technology and telecom stock declines, but the Dow industrials managed to close just above unchanged after sliding throughout the session.
The Nasdaq composite (down 19.22 to 2059.90, Charts) lost 0.9 percent and the Standard & Poor's 500 (down 2.41 to 1148.16, Charts) index lost 0.2 percent. However, the Dow Jones industrial average (up 12.44 to 10570.81, Charts) gained 0.1 percent, after having spent the morning and early afternoon in negative territory.
Hopes that the economy is recovering and that first-quarter earnings will deliver fueled a strong three-session rally that lasted through Monday. But investors were more willing to take profits Tuesday, particularly following an earnings warning from Nokia.
"The reaction to Nokia today and to QLogic last week tells you that the market is in a place where if you miss earnings, it's not going to be tolerated," said Peter Green, technical market analyst at MKM Partners. "When the market is a little healthier, the negatives have less impact."
Case in point was the reaction after-hours to the earnings from Alcoa, the first Dow component to offer its results. The aluminum producer reported earnings from continuing operations of 40 cents per share, up from 23 cents a year earlier, due to higher prices for aluminum. However, analysts surveyed by First Call were looking for earnings on average of 42 cents per share. With expectations for the earnings period so high, investors focused on the company's miss of analysts' earnings estimates, and sent the shares lower after hours.
Yet, overall, earnings are expected to be strong. Analysts surveyed by First Call are forecasting that first-quarter earnings likely rose 17 percent, the best first-quarter year-over-year growth in four years. First Call's own analysts expect that real earnings will likely rise as much as 20 percent, due to the lack of negative pre-announcements.
"The focus is moving to earnings now," said Peter Cardillo, chief market strategist at S.W. Bach & Co. "We've got Yahoo! reporting tomorrow after the close and GE Thursday. Expectations are high, but I think in the short-term, positive earnings will be well-received by the market."
In addition to earnings, Wednesday's trade may be impacted by after-hours news Tuesday that Boeing (BA: Research, Estimates) has settled on units of General Electric (GE: Research, Estimates) and Rolls Royce to build the engines for its new 7E7 commercial jets, bad news for rival United Technologies (UTX: Research, Estimates). Financial details of the deal were not disclosed but analysts think it could ultimately be worth about $40 billion.
What moved?
Although blue chips recovered some from morning and early afternoon losses, technology and telecom did not.
Mobile phone leader Nokia (NOK: down $3.94 to $17.21, Research, Estimates) tumbled 18.6 percent after warning that its first-quarter earnings per share would be on the low end of its previous estimated range, and that revenue would fall 2 percent from the same period a year earlier, largely because most of its sales in the quarter came from its lower-end products. Nokia also said its handset volumes rose by 19 percent in the quarter, below the industry gain of 25 percent.
The news pressured other telecom gear makers, including Texas Instruments (TXN: down $1.78 to $29.16, Research, Estimates), which counts Nokia as its largest customer.
Shares of Nortel Networks (NT: down $0.16 to $5.90, Research, Estimates) lost 2.6 percent in active New York Stock Exchange trade one session after the company said the Securities and Exchange Commission formalized a previous informal inquiry into Nortel's recent restatement of certain financial results.
On the Nasdaq, Yahoo! (YHOO: down $1.22 to $48.77, Research, Estimates) lost 2.4 percent, one day ahead of the release of its earnings report. Schwab SoundView downgraded the Internet bellwether, citing the belief that Yahoo! Japan's market value is unsustainable, and a slip in that value would hurt Yahoo!'s valuation, too.
A variety of other technology shares declined as well, including chips and chip gear makers, which had rallied assuredly in the last few sessions. The Philadelphia Semiconductor (down 10.63 to 508.07, Charts) index, or the Soxx, lost 2 percent.
Supporting the Dow during the session was Alcoa (AA: up $0.61 to $36.50, Research, Estimates), which gained ahead of its earnings, as well as the three components that are leaving the Dow Thursday: International Paper (IP: up $0.43 to $42.83, Research, Estimates), Eastman Kodak (EK: up $0.35 to $25.55, Research, Estimates) and AT&T (T: up $0.24 to $19.73, Research, Estimates). The three bounced after falling during the recent market rally.
Market breadth Tuesday was negative and volume was relatively heavy. On the New York Stock Exchange, where 1.39 billion shares traded, losers outnumbered gainers by more than five to three. On the Nasdaq, there were two decliners for every one stock that rose, as 1.78 billion shares traded.
Treasury prices rose, with the 10-year note adding 14/32 of a point in price for a yield of 4.17 percent. The dollar fell versus the euro and gained versus the yen.
Among commodities markets, NYMEX light sweet crude oil futures added 59 cents to settle at $34.97 a barrel. COMEX gold added $3.50 to settle at $419.80 per ounce, bouncing after several sessions of declines.
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