U.S. stocks dropped on Tuesday, as disappointing data on the housing market outweighed strong results from bellwethers Apple and Caterpillar.

New construction of U.S. homes rose less than expected in September, while U.S. producer prices posted an unexpected decline, largely on falling energy prices.

Not only were the housing numbers weaker than expected, but we're entering into a time that's seasonally weak, said Bruce Bittles, chief investment strategist at Robert W. Baird in Nashville, Tennessee.

If you're looking for to firm up, you'll have to wait until March or April, when the next cycle begins.

While the data offset the earnings reports, the latest batch of quarterly results suggested room for economic optimism.

Caterpillar Inc hit a 12-month high after its third-quarter earnings soared past expectations. The construction equipment maker also raised its full-year outlook, saying it saw signs a recovery was underway. Shares gained 2.1 percent to $59.08.

Caterpillar was the Dow's <.DJI> best performer, even as the industrial average dropped 85.93 points, or 0.85 percent, to 10,006.34. The Standard & Poor's 500 Index <.SPX> fell 10.32 points, or 0.94 percent, to 1,087.59. The Nasdaq Composite Index <.IXIC> slid 18.38 points, or 0.84 percent, to 2,158.58.

Technology issues were lifted one day after two major bellwethers reported strong results.

Apple Inc and Texas Instruments Inc both posted earnings and sales that were higher than expected. Apple shares gained 5 percent to $199.43, while TI climbed 1.9 percent to $23.96.

That results are coming in stronger than expected means that we're on firmer ground than a lot of people were expecting, Baird's Bittles said. I don't expect this to change as we continue going through the season.

Caterpillar was one of five Dow components to report. Among the others, United Technologies Corp was off 0.5 percent at $65.13 after the diversified U.S. manufacturer said profit declined, but still beat expectations. Pfizer Inc gained 0.2 percent to $18 after its profit topped estimates.

Both Coca-Cola Co and DuPont Co fell after reporting sales that missed expectations. DuPont was down 2.5 percent to $33.72, while Coca-Cola lost 2.4 percent to $53.49.

Ford Motor Co rose 2.5 percent to $7.76 after the automaker was upgraded by Barclays to equal weight from underweight.

In other research changes, Morgan Stanley downgraded both Boeing Co and Spirit Aerosystems Holdings Inc to underweight. The firm wrote that Boeing shares may face downward pressure due to likely poor demand, and that Spirit may not be able to escape those challenges. Boeing fell 4 percent to $51.28, while Spirit was off 6.5 percent to $17.28.

(Editing by Jeffrey Benkoe)