Wall St down as focus shifts to earnings; IBM drags

By Angela Moon

NEW YORK (Reuters) - U.S. stocks fell on Thursday as investors shifted their focus to earnings of heavyweight companies such as IBM, in the wake of an agreement by lawmakers in Washington to reopen the federal government and raise the debt ceiling.

International Business Machines Corp was among the biggest decliners, hitting a two-year low a day after reporting a 4 percent drop in third-quarter revenue, worse than expected, amid a decline in hardware and emerging markets even as it beat profit estimates.

As of Wednesday's close, 61 companies representing 18.8 percent of S&P 500's market-cap have reported, with revenues missing expectations by 0.5 percent and earnings beating forecasts by 4.5 percent, according to RBC Capital Markets.

Earnings have been particularly strong for financials with results beating expectations by 6.2 percent and year-on-year growth of 16.4 percent, said Jonathan Golub, chief U.S. market strategist at RBC. Excluding financials, results have surprised by 3.3 percent and grew by 8.6 percent for those that have reported.

"While investors had been concerned about lower FICC trading activity and mortgage volumes, this seems to have been offset by stronger loan activity and improved credit quality," Golub said.

On Thursday, 24 companies representing 7 percent of the S&P 500 index report results, including Google after the market close.

The Dow Jones industrial average was down 85.91 points, or 0.56 percent, at 15,287.92. The Standard & Poor's 500 Index was down 3.80 points, or 0.22 percent, at 1,717.74. The Nasdaq Composite Index was down 9.89 points, or 0.26 percent, at 3,829.54.

IBM shares were down 6.5 percent at $174.69 after hitting a two-year low of $172.57 shortly after the open. It was the biggest one-day decline for the stock since April 19, also after quarterly results.

Goldman Sachs shares fell 3 percent to $157.45 after the fifth-largest U.S. bank by assets said its quarterly profit dropped amid weak bond-trading volumes.

But Verizon Communications Inc shares rose 2.6 percent to $48.49 after the company posted stronger-than expected third-quarter earnings and revenue.

EBay Inc dropped 5.2 percent at $50.71 after the company gave a disappointing holiday forecast on Wednesday, saying the U.S. economic environment had deteriorated partly because of the government shutdown.

Also weighing on the market, China's Dagong Global Credit Rating said the temporary fix of the U.S. debt issue would not solve the fundamental conundrum of the massive U.S. fiscal deficit or improve repayment ability in the long term, but could trigger defaults at any time in the future.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits dropped from a six-month high last week, but remained elevated as California continued to deal with a backlog related to computer problems. The report barely moved the market.

(Editing by Bernadette Baum and Nick Zieminski)