Stocks edged lower on Wednesday, as investors awaited proof that corporate earnings will support recent strong gains.

Earnings season is now upon us, and no one is willing to make a bet after the two-day run-up without seeing the numbers. Today should be a day of less drama as the market gets ready to digest the (quarterly) results, said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

The Dow Jones industrial average <.DJI> lost 32.50 points, or 0.33 percent, to 9,698.75. The Standard & Poor's 500 Index <.SPX> shed 1.87 points, or 0.18 percent, to 1,052.85. The Nasdaq Composite Index <.IXIC> dropped 1.82 points, or 0.09 percent, to 2,101.75.

One day before most retailers report same-store sales for September, Costco Wholesale Corp posted a quarterly profit that beat expectations, suggesting an improvement in the weak U.S. retail environment.

Costco shares rose 3.5 percent to $59.95, and peer Family Dollar Stores Inc gained 3.4 percent to $29.45, even as the broader market paused.

Alcoa Inc , the first Dow component to report quarterly results, will be scrutinized as investors look for stronger evidence to underpin a rise in stocks after the recent spike.

Generally we're looking for companies to exceed expectations in the third quarter. The key will be what they did in terms of revenue growth between the second and third quarters, and what the guidance for 2010 will be, said John Canally, investment strategist and economist at LPL Financial in Boston.

AT&T Inc shares fell 1.4 percent to $26.37, and the S&P telecommunications sector <.GSPL> dropped 2.3 percent and was the top drag on the broad index.

AT&T said it will allow Internet voice calls on Apple's iPhone, clearing the way for services such as Skype. Inc rose 2.3 percent to $92.03 as the online retailer introduces Kindle, its wireless electronic reader, in over 100 countries, including China and most of Europe, and lowers prices in the United States.

Coca-Cola Co added 1.2 percent to $54.95 and was the top boost to the Dow industrials after Deutsche Bank boosted its rating on the stock to buy.

Insurance risk specialist Verisk Analytics Inc raised $1.88 billion on Tuesday in the biggest initial public offering by a U.S. company since March 2008.

(Additional reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)