NEW YORK (Reuters) - Stocks fell on Tuesday as investors found little reason to extend a rally that has taken indexes to record highs in recent sessions, while IBM fell on bearish analyst commentary.
Trading volume has been muted, with Monday marking the lightest full-day action of the year, a sign that market participants are largely holding pat near historic levels.
Recent market-moving events have moved to the background. The intense investor focus on Federal Reserve policy has receded after last week's bearish payroll report suggested the Fed would not ease its monetary stimulus soon.
In addition, earnings season is winding down. While about 100 S&P 500 components are still scheduled to release results, most of the bellwether companies have already reported.
"We're in an extremely quiet market and investors are just waiting cautiously for the next catalyst," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. "Still, momentum looks to remain strong, so we're not seeing a great deal of selling."
American Eagle Outfittersplunged a day after the retailer said its second-quarter profit would be hurt by weak sales and margins. A number of analysts downgraded the stock.
The stock fell 15 percent to $16.90 and weighed on other retailers. Aeropostaledropped 4.9 percent to $14.21 while Gap Incslid 1.7 percent to $45.51 and Abercrombie & Fitchlost 5.1 percent to $48.94.
The Dow Jones industrial averagewas down 85.94 points, or 0.55 percent, at 15,526.19. The Standard & Poor's 500 Indexwas down 4.03 points, or 0.24 percent, at 1,703.11. The Nasdaq Composite Indexwas down 5.86 points, or 0.16 percent, at 3,687.09.
Credit Suisse downgraded International Business Machines Corpto "underperform," from "neutral," saying organic growth would be challenging in the future. The firm cut its price target on the Dow component by $25 to $175. Shares of IBM fell 2.3 percent to $190.92, weighing on the Dow.
The S&P 500 has risen for five of the past six weeks, gaining more than 7 percent over that period. The index closed at an all-time high on Friday, as did the Dow. The S&P's 50-day moving average, currently at 1,692.77, could serve as a support level in any market decline.
Cognizant Techrose 2.7 percent to $75.41 after reporting a 20 percent rise in second-quarter revenue, while Fossil Group Incrose 14 percent to $122.67 after its results.
Of the 391 companies in the S&P 500 that reported earnings for the second quarter through Monday, 67.8 percent have topped analysts' expectations, in line with the average beat over the past four quarters, data from Thomson Reuters showed. About 55 percent have reported revenue above estimates, more than in the past four quarters but below the historical average.
Shares of the Washington Post Cojumped 5.5 percent to $599.99 after Amazon Incfounder Jeff Bezos agreed to buy the publishing company's newspaper assets for $250 million.
The U.S. trade deficit narrowed sharply in June to its lowest level in more than 3-1/2 years as imports reversed the prior month's spike, suggesting an upward revision to second-quarter growth. The gap narrowed to $34.2 billion, compared with expectations of $43.5 billion.
(Editing by W Simon and Nick Zieminski)
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