A tepid report on housing starts sent stocks into a tizzy and major indexes slipped from their year highs as solid earnings reports from Apple Inc. to Caterpillar were overlooked by anxious investors.  A rebound in dollar from its 14-month lows also added to the downward pressure and hurt commodities, sending energy and material shares lower. 

Weakness in share sent Treasury prices higher, with the 10-year closing up 13/32, to 102 11/32.  The yield fell to 3.34%, from 3.39% late Monday.  On Tuesday, the 30-stock Dow Jones industrial average fell 50.71 points, or 0.50%, to 10,041.48.  The broad Standard & Poor’s 500-stock index retreated 6.85 points, or 0.62%, at 1,091.06 and the tech-heavy Nasdaq composite index lost 12.85 points, or 0.59%, to 2,163.47.  Market breadth was negative.  On the New York Stock Exchange, declining shares beat those that rose in price two to one on volume of 1.24 billion shares.

After the close yesterday, Yahoo Inc. (NASDAQ:YHOO) and SanDisk Corp. (NASDAQ:SNDK) reported strong quarterly numbers that were well ahead of Street expectations.  Caterpillar (NYSE:CAT) was the leading gainer among the Dow 30 stocks, rising 3.4% after it reported estimate topping numbers.  Apple (NASDAQ:AAPL) shares climbed 4.7%.

Military contractor Lockheed Martin (NYSE:LMT) fell nearly 6% after it announced weak 2010 outlook.  Chemical maker DuPont (NYSE:DD) and UnitedHealth Group Inc (NYSE:UNH) reported better-than-expected numbers, helped by cost-cutting measures.  However, DuPont (NYSE:DD) shares fell 2.2% after the company reported lower-than-expected revenue, even as earnings came in above estimates and the firm raised its full-year outlook.

Coca-Cola’s (NYSE:KO) shares dropped 1.3% as it reported revenue below estimates, even as earnings were inline with expectations.  The company noted, “We expect the consumer to continue facing economic uncertainties into 2010 and for consumer sentiment to recover slowly.” 

Interestingly, the market’s measure of volatility, the CBOE Vix, continued its southward move, falling 2.75% to 20.90. All ten S&P500 sectors ended in the red, led by declines in utilities (-1.2%), health care (-1.1%), and basic materials (-1.0%).  Technology stocks showed some strength and eased 0.03%.

Oil prices rose to an intraday high of $80.05 yesterday, the highest level in a year, before retreating a little and ending the session off 52 cents at $79.09.  The drop came amid concerns that the world’s largest oil consumer might face a weaker-than-expected recovery. Moreover, OPEC Secretary General El-Badri noted that prices above $80 could hinder economic growth.  El-Badri said he does not expect prices above $100 in the near future due to what he called “no shortage of oil supply.”

Today’s markets will see earnings from big names including Boeing (NYSE:BA), Eli Lilly (NYSE:LLY), Freeport-McMoRan (NYSE: FCX), Morgan Stanley (NYSE:MS), US Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC) before the market opens.

Zacks Investment Research