Markets down as earnings season off to dreary start

NEW YORK - Downbeat reports from Alcoa and Chevron at the start of corporate earnings season pulled stock indexes lower for a third straight day Wednesday. The Dow Jones industrial average slumped 128 points, its steepest loss since late June.

Alcoa, the Pittsburgh aluminum producer, beat Wall Street's earnings estimates on Tuesday night but said it expects a slowdown in China to weaken demand for aluminum. Its stock fell 42 cents Wednesday to $8.71.

The company is often used as a bellwether for the global economy.

Chevron, the country's second-largest oil company, warned late Tuesday that slumping oil prices and production would cause earnings to be "substantially lower." It blamed Hurricane Isaac for disrupting production at a Mississippi refinery.

On Tuesday, the Supreme Court also refused to block a $19 billion judgment levied against Chevron by an Ecuadorian court for polluting the Amazon. Chevron's stock sank $4.91 to $112.45.

The Dow fell 128.56 points to close at 13,344.97, just shy of 1 percent, its fourth straight drop and the largest point decline since June 25. Chevron alone pulled the Dow down 38 points.

The Standard & Poor's 500 index fell 8.92 points to 1,432.56. The Nasdaq lost 13.24 points to 3,051.78. The yield on the benchmark 10-year Treasury slipped to 1.68 percent, down from 1.71 percent late Tuesday.

In one of the few economic reports out Wednesday, the Federal Reserve said the U.S. economy "expanded modestly" from mid-August through September. The survey, known as the Beige Book, pointed to improvements in car sales, manufacturing and the housing market. Employment and consumer spending, however, remained mostly flat.

In the Philadelphia region, the Fed said, the overall economic outlook "appears somewhat more optimistic" than in the most recent survey, in August, and business leaders "are beginning to look beyond the pending election and looming fiscal cliff."

The Fed said that Philadelphia-area manufacturing activity, commercial leasing and sales of new homes declined since August, but that sales of existing homes, retail sales, auto sales and bank lending volumes were growing. Service-sector firms reported mixed results, the Fed said.

Wal-Mart Stores surged $1.28 to $75.42, and earlier touched an all-time high of $76.81. The president of its U.S. division told Wall Street analysts that the retail giant plans to open more small-scale stores, including its Express chain, to compete with discount retailers and drugstore chains.

Alcoa's earnings report marks the unofficial start to the quarterly earnings season, expected to be the worst in three years.

Yum Brands jumped 8 percent, or $5.28 to $70.99, the top stock in the S&P 500 index. The parent of Taco Bell, Pizza Hut and other fast-food chains said results from China stores should remain strong, even as the Chinese economy slows.

FedEx gained 5 percent, or $4.41 to $89.99. The world's second-biggest package delivery company unveiled a restructuring plan Monday.