Wall Street falls as Caterpillar, health stocks weigh

UPDATE: U.S. stocks closed lower on Thursday in a volatile session on uncertainty about U.S. monetary policy and global economic growth after market heavyweight Caterpillar cut its sales forecast and healthcare investors fled for the exits.

The Dow Jones industrial average .DJI fell 77.43 points, or 0.48 percent, to 16,202.46, the S&P 500 .SPX lost 6.4 points, or 0.33 percent, to 1,932.36 and the Nasdaq Composite .IXIC dropped 18.27 points, or 0.38 percent, to 4,734.48.

Original story:

U.S. stocks were lower by about 1 percent in afternoon trading on Thursday after Caterpillar's sales forecast cut dragged on industrials and exacerbated fears of slowing global economic growth, and as health stock slipped again.

Investors were also cautious ahead of a speech by Federal Reserve Chair Janet Yellen, which could provide clues regarding the timing of an increase in interest rates.

Caterpillar, the world's biggest mining and construction equipment maker, said it could cut up to 10,000 jobs and shut plants as it faces challenging conditions in key regions and the mining and energy sector.

The company's shares fell as much as 7.9 percent to a 5-year low and were the biggest drag on the Dow. The S&P industrials index fell 1.3 percent.

"The (Caterpillar) news is not helping matters, it's emblematic of a weaker global economy," said Joseph Quinlan, chief market strategist for U.S. Trust, in New York.

"People shouldn't be surprised but when you get those big headline numbers, that subtracts from confidence obviously."

Mining equipment maker Joy Global fell 2.9 percent, while Dow component Boeing was down 2.5 percent and General Electric declined 1.1 percent.

At 12:48, the Dow Jones industrial average was down 183.49 points, or 1.13 percent, at 16,096.4. Caterpillar shaved 28 points off the index.

The S&P 500 was down 18.95 points, or 0.98 percent, at 1,919.81 and the Nasdaq composite was down 53.44 points, or 1.12 percent, at 4,699.30.

Nine of the 10 major S&P sectors were lower, with the health sector's 1.4 percent fall leading the decliners. The Nasdaq biotech sector was down 2.5 percent. Both indexes were on track for a fifth straight day of losses.

Apple and Gilead declined about 3.5 percent and weighed the most on the S&P and the Nasdaq.

Only the utilities sector eked out a gain of 0.23 percent as the U.S. 10-year treasury yield hit 4-week lows.

Quinlan said better-than-expected earnings could act as a circuit breaker to the negative sentiment permeating the market.

However, earnings of S&P 500 companies are expected to decline 3.9 percent in the third quarter from a year ago, Thomson Reuters data shows.

The CBOE Volatility index, known as Wall Street's "fear gauge", jumped 7.4 percent to 23.77, above its long-term average of 20.

Concerns of slowing global growth was a key reason cited by the Fed when it held off from hiking rates last Thursday.

Since then the U.S. equity market has been skittish, with the S&P 500 losing 2.8 percent up to Wednesday's close. Yellen delivers a speech on inflation at 5 p.m. ET (2100 GMT).

Even positive U.S. economic data on Thursday failed to spur optimism.

A gauge of U.S. business investment plans fell slightly in August, jobless claims barely rose last week, and new single-family home sales rose more quickly than expected in August, signs that global economic headwinds were doing little to impede U.S. growth.

"The Fed has a credibility problem with the market and that will be a variable that will weigh on sentiment until it's reconciled," said Quinlan.

Declining issues outnumbered advancing ones on the NYSE by 2,263 to 693. On the Nasdaq, 1,814 issues fell and 881 advanced.

The S&P 500 index showed no new 52-week highs and 68 new lows, while the Nasdaq recorded 13 new highs and 162 new lows.

(Reporting by Tanya Agrawal in Bengaluru; Editing by Savio D'Souza)

Tags: Reuters