* Alcoa beats expectations but cautions of slowdown
* Yum Brands defies China sluggish growth, raises outlook
* True Religion exploring sale, shares jump
* Indexes: Dow off 0.31 pct, S&P off 0.13 pct, Nasdaq up 0.04 pct
By Chuck Mikolajczak
NEW YORK, Oct 10 (Reuters) - U.S. stocks dipped on Wednesday as earnings season began with Alcoa forecasting slower demand for aluminum, while a profit warning from Chevron weighed on the energy sector.
But declines were muted as Yum Brands Inc, climbed 8 percent to $70.99 and was the best performer on the S&P 500. The parent company of KFC and other fast-food restaurants raised its full-year outlook after sales in China held up despite slowing Chinese growth.
The overall tone at the start of the earnings season was downbeat, however. The S&P 500 index was on pace for its fourth day of declines over concern the global economic slowdown was hurting profits and causing companies to lower their outlooks. The index was testing the technical support level of 1,440.
Stronger demand from airplane and automobile producers helped Alcoa, the largest U.S. aluminum producer, to report third-quarter results that beat analysts' expectations. Still, Alcoa fell 3.1 percent to $8.85 as the biggest percentage decliner on the Dow.
Chevron Corp dipped 3 percent to $113.80 as the biggest drag on the S&P 500 after the second-largest U.S. oil company warned third-quarter profits would be "substantially lower" than in the previous quarter. Chevron said a hurricane and maintenance curbed its oil and gas output and a fire hit its refining operation.
Lackluster growth in China, the world's second-largest economy, is expected to rein in corporate earnings in the third quarter and dent profit forecasts as the Asian nation feels the pinch of the debt crisis in the euro zone, a key trading partner.
"You've seen very cautionary earnings results and even forward guidance. Alcoa has good earnings, but their forward guidance is lackluster. It points to a slow China and slow global growth," said Richard Weeks, managing director at HighTower Advisors in Vienna, Virginia.
The Dow Jones industrial average dropped 42.05 points, or 0.31 percent, to 13,431.48. The Standard & Poor's 500 Index shed 1.83 points, or 0.13 percent, to 1,439.65. The Nasdaq Composite Index gained 1.18 points, or 0.04 percent, to 3,066.21.
The International Monetary Fund and the World Bank have recently cut world growth forecasts, citing concerns about China's slowdown.
Engine maker Cummins Inc lowered its 2012 forecast for a second time this year, citing delays in customer spending due to a weakening global economy, and said it would cut up to 1500 jobs. Cummins shares dropped 2.6 percent to $88.45.
The cautious outlooks are the latest in a string of forecasts from large multinational companies, including FedEx Corp, Caterpillar Inc and Hewlett-Packatrd Co .
Analysts forecast third-quarter earnings of Wall Street's S&P 500 companies would fall 2.3 percent from the year-ago quarter, according to Thomson Reuters data, which would be the first drop in U.S. quarterly earnings in three years.
According to data through Tuesday, 94 companies in the benchmark S&P index have issued negative outlooks, compared with 23 positive pre-announcements, for a ratio of 4.1, the weakest showing since the third quarter of 2001.
FedEx said it plans to slash costs at its underperforming express air freight and services divisions, with profit improvements of $1.7 billion planned at those operations over the next four years. Shares gained 5.5 percent to $90.30.
U.S. data showed wholesale inventories rose 0.5 percent, as expected, in August. Investors will also look to the Federal Reserve's Beige Book at 2 p.m (1800 GMT) for the U.S. central bank's assessment of the economy.
Earnings from warehouse chain Costco Wholesale Corp were a bright spot as the company reported a 27 percent jump in quarterly profit on higher sales and membership fees. Costco shares were up 4 percent to $103.60.
True Religion Apparel Inc surged 22.2 percent to $25.67 after the denim maker said it was evaluating strategic alternatives, which could include a possible sale of the company, after receiving indications of interest from third parties.