Cummins warns on sales, leads market slide

US engine maker Cummins Inc cut its full-year sales forecast on Tuesday, sending its shares down 10% at one point and leading a fall in US stocks.

Pessimism from US companies is compounding worries the sluggish world economy is taking a toll on US profit growth. Cummins cited weaker US orders from truck and power generation customers, a stronger dollar and softer demand in emerging markets.

Its sales warning came on top of earlier weak forecasts from chipmakers Applied Material Inc and Advanced Micro Devices , which caused the market to extend losses in afternoon trading.

The news from Cummins sent the S&P 500 down for a fourth consecutive day, the index's longest downward streak since May when it fell for six consecutive days. Shares of industrials fell the most at 1.6%. Cummins was among the biggest losers, closing 8.9% lower at $86.91.

"The sell-off really started with Cummins," said Ryan Detrick, technical analyst at Schaeffer's Investment Research, in Cincinnati. It was "basically reiterating the concerns that we've had going into earnings (season), like how the European issues are really starting to have an impact on the US"

Shares of Cummins slid 10% at one point in afternoon trading after the company said it expects second-quarter sales of about $4.45 billion and warned that it sees full-year sales "in line" with 2011 rather than growing by 10% as it had earlier forecast. Analysts, on average, had expected second-quarter sales of $5.1 billion and 2012 sales of just under $20 billion.

Cummins, due to report results on July 31, is the second major industrial company this week to warn about quarterly results. On Monday, Dover Corp cut its 2012 profit forecast, citing weakness in Europe.

"Order trends in the US for trucks and power generation equipment have softened and demand in Brazil, China and India is not improving as we had previously expected," Cummins Chief Executive Tom Linebarger said in a statement.

Separately, Cummins said it would raise its quarterly dividend by 25% to 50 cents a share.