Wall Street falls on earnings, but indexes well off lows

By Ryan Vlastelica

NEW YORK (Reuters) - U.S. stocks fell in a broad decline on Tuesday, with the Dow seeing outsized losses after several blue chip components' results pointed to weakening conditions, while an unexpected decline in durable goods orders also weighed on sentiment.

Tech shares were the big drag on the day, falling 2.4 percent in their biggest one-day drop since October, in the wake of results from industry bellwether Microsoft. Industrial shares also underperformed, led by a decline in Caterpillar.

The two names were the biggest decliners on the Dow, but fellow components Procter & Gable and Du Pont Co also tumbled on the day. Only one component of the 30-stock index, Johnson & Johnson, was in positive territory.

Microsoft fell 8.5 percent to $43 a day after the main engine of its historic earnings power - selling Windows and Office to big businesses - showed signs of waning. Heavy machinery marker Caterpillar gave an outlook below expectations, warning that the recent plunge in oil prices would hurt its energy equipment business. Shares dropped 7.5 percent to $79.56.

"There's clearly a lot of froth baked into certain areas of tech, while Caterpillar is giving tangible evidence that things can go down more than they already have," said Jim O'Donnell, chief investment officer at Forward in San Francisco.

"People may not be aware of the sensitivities that heavy industrial guys have to the oil cycle, or what the ripple effects of oil's weakness will be. There are a lot of companies that are going to be adversely impacted."

With 24 percent of the S&P 500 having reported, 70.6 percent of companies have topped earnings expectations while 55.5 percent have beaten on revenue, according to Thomson Reuters data. That compares with the long-term average of 63 percent for earnings and 61 percent for revenue.

Many multinational companies disappointed this quarter, with the stronger dollar a common culprit. P&G was one of the companies pressured by a stronger dollar, sending shares down 3.6 percent to $86.38.

At 2:05 p.m. (1405 GMT) the Dow Jones industrial average fell 239.72 points, or 1.36 percent, to 17,438.98, the S&P 500 lost 20.18 points, or 0.98 percent, to 2,036.91 and the Nasdaq Composite dropped 64.41 points, or 1.35 percent, to 4,707.35.

Adding to the day's weakness, a gauge of U.S. business investment plans unexpectedly fell in December, another sign that slowing global growth and falling crude oil prices were having an impact on the economy.

On the plus side, consumer confidence posted its highest reading since August 2007. That helped indexes recover from their lows of the session; the Dow earlier fell as much as 2.2 percent.

Declining issues outnumbered advancing ones on the NYSE by 1,697 to 1,339, for a 1.27-to-1 ratio; on the Nasdaq, 1,560 issues fell and 1,093 advanced, for a 1.43-to-1 ratio favoring decliners. The S&P 500 was posting 36 new 52-week highs and 10 new lows; the Nasdaq Composite was recording 48 new highs and 42 new lows.

(Editing by Nick Zieminski)