Stocks drift lower as J&J posts mixed results; Cisco deal lifts technology shares

Stocks drift lower after Johnson & Johnson report

NEW YORK — Stocks retreated from their highest levels in a year Tuesday after a mixed earnings report from Johnson & Johnson.

The health care products maker, the first among a number of key companies to issue quarterly results this week, said sales fell 5 percent in the third quarter, a steeper drop than expected. Its profit rose 1 percent, narrowly beating expectations.

Investors want to see signs that businesses and consumers are picking up their spending and that companies have been able to drive higher profits through revenue growth, not just through cost cuts, which helped boost income in the second quarter.

“They’re not telling us the hoped for better-than-expected sales,” said Linda Duessel, equity market strategist at Federated Investors. “We want sales growth now.”

Later Tuesday, investors will also get reports from tech giant Intel Corp. and railroad operator CSX Corp.

Investors around the globe have sent stocks higher in recent days on hopes that third-quarter earnings reports, which arrive in greater numbers this week, will exceed expectations and validate hopes that the economy is on the mend.

In other trading, the dollar fell against other currencies, sending commodities higher. Bond prices rose, recovering some of the steep losses from last week.

News that Cisco Systems Inc. agreed to buy Starent Networks Corp. for $2.9 billion lifted some tech shares but didn’t have a large affect on the overall market.

In late morning trading, the Dow Jones industrial average fell 37.56, or 0.4 percent, to 9,848.24. The Standard & Poor’s 500 index fell 6.03, or 0.6 percent, to 1,070.16, while the Nasdaq composite index fell 4.45, or 0.2 percent, to 2,134.69.

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 303.8 million shares compared with 266.7 million shares traded at the same point Monday.

The Dow moved as high as 9,931 on Monday, just 69 points away from 10,000, a level not seen in a year. It was the third straight day of gains for the index. The S&P 500 index, which has risen over the past six days, also finished at its highest level in a year.

The gains have been driven in large part by expectations for upbeat earnings reports, stoked by solid profits at companies like Alcoa Inc. and Royal Philips Electronics.

Later this week, investors will look to reports from major U.S. banks including JPMorgan Chase & Co., which reports on Wednesday. Goldman Sachs Group Inc. and Citigroup Inc. report results on Thursday, while Bank of America Corp. is scheduled to issue its report on Friday.

Jerry Webman, chief economist at OppenheimerFunds Inc., said companies are going to have to post better numbers for the market to hold its gains.

“The market only makes sense at these levels if earnings can grow at a decent pace,” he said. “What we’re hearing now is OK, but you don’t get long-term earnings growth out of cost cutting.”

Johnson & Johnson shares fell $1.58, or 2.5 percent, to $60.95 after its earnings report.

Starent Networks soared $4.95, or 17 percent, to $33.98, while Cisco Systems edged up 17 cents to $23.95.

CIT shares dropped more than 13 percent, falling 14 cents to 90 cents after the lender said its chairman and CEO Jeffrey M. Peek plans to resign at the end of the year. CIT has been trying to avoid bankruptcy for months.

The ICE Futures U.S. dollar index, which measures the dollar against other major currencies, dropped to a 14-month low. Gold subsequently hit a record high $1,069.70 an ounce, while oil prices added 39 cents to $73.66 a barrel on the New York Mercantile Exchange.

Bond prices rose, pushing yields down. The yield on the benchmark 10-year Treasury note fell to 3.31 percent from 3.38 percent late Friday. Bond markets were closed Monday in observance of Columbus Day.

The Russell 2000 index of smaller companies fell 5.48, or 0.9 percent, to 608.33.

Overseas, Britain’s FTSE 100 lost 0.6 percent, while Germany’s DAX index and France’s CAC-40 fell 1.1 percent. Earlier Tuesday, Japan’s Nikkei stock average rose 0.6 percent and Hong Kong’s Hang Seng index gained 0.8 percent.