US Stocks Take Step Back From Rally

NEW YORK (AP) -- Wall Street took a step back from its big rally so far this year, and most stocks fell Tuesday following a mixed set of earnings reports from U.S. companies.

The S&P 500 lost 12.23, or 0.3%, to 4,576.73, coming off its fifth straight winning month. The Nasdaq composite sank 62.11, or 0.4%, to 14,283.91. The Dow Jones Industrial Average squeezed out a gain of 71.15 points, or 0.2%, to 35,630.68 even though most of the stocks within it weakened.

Travel-related stocks helped drag the market lower after they gave up some of their big gains from earlier in the year. Norwegian Cruise Line lost 12.1% despite reporting stronger profit and revenue for the spring than expected. Expectations have been high for it and rivals after its stock soared 80% for the year through Monday.

JetBlue Airways sank 8.3% to roughly halve its nearly 20% gain for the year through July, despite reporting better profit than expected for the latest quarter. It cut its forecast for results for the full year, partly because of the cancellation of a partnership with American Airlines

Worries have been broadly rising that expectations have built too high for the entire U.S. stock market after the S&P 500 surged more than 19% so far this year. Stocks had leaped to a 16-month high on hopes inflation is cooling enough to get the Federal Reserve to stop hiking interest rates. That in turn could allow the economy to avoid a long-expected recession.

While inflation has indeed come down since the summer and the economy has remained remarkably resilient, critics say it's no guarantee inflation will continue to cool at the same rate. They say stock prices have risen too far, too quickly.

Among other stocks that struggled with high expectations Tuesday was Molson Coors Beverage. It fell 4.7% after reporting weaker revenue for the spring than expected, even though its profit topped expectations.

Most companies so far this reporting season have beaten forecasts, but that's usually the case. And expectations were low coming into this season, with analysts calling for the worst decline in S&P 500 earnings per share in three years.

Among the winners on Wall Street Tuesday was Caterpillar. It rose 8.9% after blowing past analysts' forecasts for earnings during the spring. It was the stock pushing up the most on the Dow, where Caterpillar can have more of an impact than on the S&P 500 because of its big stock price.

Arista Networks jumped 19.7% for the biggest gain in the S&P 500 after it also beat expectations for profit and revenue in the latest quarter.

Reports on the economy Tuesday came in mixed. The number of job openings advertised across the country dipped slightly in June, when economists were expecting a rise. But the job market broadly remains solid, propping up the rest of the economy and keeping it out of a recession so far.

One report on the manufacturing industry from the Institute for Supply Management said it contracted at a slightly worse pace in July than economists expected, but not as badly as it did in June. A separate report from S&P Global also said U.S. manufacturing is continuing to decline.

"However, producers are clearly shrugging off recession fears and planning for better times ahead," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Other profit reports scheduled for later in the week could have more of an impact. Amazon and Apple are scheduled to report on Thursday, and because they're two of the biggest stocks by market value, their movements pack more punch on the S&P 500 than other companies'. Both have also soared this year, along with other Big Tech stocks.

Fed Chair Jerome Powell has also pointed to Friday's upcoming report on the overall U.S. job market as an important data point. Growth needs to be strong enough to keep a lid on worries about a possible recession. But a reading that's too hot could also mean upward pressure on inflation, which could push the Fed to get more aggressive about rates.

High rates undercut inflation by slowing the overall economy and dragging on prices for stocks and other investments. The Fed has already hiked its main rate to its highest level in more than two decades, a jolting shock after the rate began last year at virtually zero.

In stock markets abroad, indexes were mostly lower in Europe and mixed in Asia.

In the bond market, the yield on the 10-year Treasury rose to 4.03% from 3.97% late Monday. It helps set rates for mortgages and other important loans.