U.S. stock indexes fell on Wednesday on lingering worries about the state of the economy and the uncertain outlook for second-quarter earnings, though surprisingly strong demand for a Treasury auction limited losses.
The earnings period unofficially kicks off after the bell on Wednesday with the release of results from Alcoa Inc , the first Dow component to report.
The aluminum giant is expected to post its third straight loss after the markets close, due to falling demand. The stock fell 3.2 percent to $9.12 and was one of the biggest percentage losers on the Dow.
Investors are concerned that companies will have little good news to report in their quarterly results and outlooks.
I think the weight of earnings season is continuing to hang over the market, said Alan Gayle, the senior investment strategist at RidgeWorth Investments in Richmond, Virginia. There's a lot of nervousness. I don't expect a lot of companies to raise their guidance this quarter.
The major stock indexes pared losses after an auction of reopened 10-year Treasury notes drew strong demand, easing concerns about the U.S. government's ability to finance spending.
Energy shares declined as August crude futures fell 3.8 percent to $60.59 per barrel, a more than six-week low. Crude oil prices dropped after the U.S. Energy Information Administration released data that showed gasoline and distillate inventories rose more than expected last week, pointing to ongoing weakness in demand -- adding to fears about the economy.
The S&P Energy index <.GSPE> slid 1.5 percent to 343.14 while ConocoPhillips dropped 2.7 percent to $38.90.
The Dow Jones industrial average <.DJI> slipped 17.54 points, or 0.22 percent, to 8,145.99. The Standard & Poor's 500 Index <.SPX> was off 5.38 points, or 0.61 percent, to 875.65. The Nasdaq Composite Index <.IXIC> gave up 6.23 points, or 0.36 percent, at 1,739.92
After a rally that took the S&P 500 index up 40 percent from 12-year lows in early March, investors have been met with a rash of data -- especially the weaker-than-expected June payroll report last week -- that has undermined hopes for an economic rebound.
In the tech sector, Microsoft Corp shares were down after Google Inc said it will launch a new operating system in the second half of 2010, taking on Microsoft's core business.
Microsoft, a Dow component, shed 1.7 percent to $22.16 while Google added 1.4 percent to $402.10.
In an overall shift away from riskier assets, in currency markets investors globally fled to the safe haven of the yen, sending the dollar, euro and other world currencies lower against the Japanese currency.
Leaders of the Group of Eight richest nations and the major developing powers gathered for a three-day summit in Italy. They are expected to agree the world's economy is still too weak to remove stimulus measures.
(Editing by Leslie Adler)