* AT&T drags on S&P after announcing phone sales
* Monsanto stock jumps on strong earnings, raised outlook
* GameStop shares slide after sales data, guidance
* Indexes down: Dow 0.6 pct, S&P 500 0.5 pct, Nasdaq 0.4 pct
By Gabriel Debenedetti
NEW YORK, Jan 8 U.S. stocks dropped on Tuesday
as investors pulled back from last week's rally on the "fiscal
cliff" deal in Washington, and ahead of what is expected to be a
weak earnings season.
AT&T Inc stock dropped 1.5 percent to $34.42, making
it one of the biggest drags on the S&P 500, after the company
said it sold more than 10 million smartphones in the quarter.
This figure beat the same quarter in 2011, but also meant
increased costs for the wireless service provider.
Providers like AT&T pay hefty subsidies to handset makers so
that they can offer device discounts to customers who commit to
After a 4.3 percent jump in the two sessions around the
close of the fiscal cliff negotiations, the S&P has fallen and
investors have found few catalysts to extend the rally that took
the benchmark to five-year highs.
"We had a brief respite courtesy of what happened on the
fiscal cliff deal and the flip of the calendar with new money
coming into the market," said Bucky Hellwig, senior vice
president at BB&T Wealth Management in Birmingham, Alabama.
"But now the stark reality of uncertainty with regard to
earnings, plus the negotiations on the debt ceiling, are there
and that doesn't give investors a lot of reason to take bets on
the long side."
The Dow Jones industrial average fell 73.68 points,
or 0.55 percent, at 13,310.61. The Standard & Poor's 500 Index
dropped 7.31 points, or 0.50 percent, at 1,454.58. The
Nasdaq Composite Index lost 12.53 points, or 0.40
percent, at 3,086.29.
Fourth quarter profits are expected to beat the previous
quarter's lackluster results, but analyst estimates are down
sharply from October. Quarterly earnings are expected to grow by
2.7 percent, according to Thomson Reuters data.
With AT&T's fall, the S&P telecom services index was
the worst performer of the 10 major S&P sectors, down 2.6
Sears Holdings shares dropped nearly 5 percent to
$40.79 a day after the company said Chairman Edward Lampert
would take over as CEO from Louis D'Ambrosio, who is stepping
down due to a family member's health issue. The U.S. retailer
also reported a 1.8 percent decline in quarter-to-date sales at
stores open at least a year.
Markets went lower as some of the first reported earnings
"It doesn't seem to be bouncing back, it might stay here or
sell off a little further," said Stephen Carl, head of U.S.
equity trading at The Williams Capital Group in New York.
Shares of restaurant-chain operator Yum Brands Inc
fell 4.2 percent to $65.03 a day after the KFC parent warned
sales in China, its largest market, shrank more than expected in
the fourth quarter.
GameStop was one of the worst performers on the S&P
500 as shares slumped 5.4 percent to $23.41 after the video game
retailer reported low customer traffic for the holiday season
and cut its guidance.
Shares of Monsanto Co gained 2.5 percent to $98.40
after reaching a more than four-year high at $99.99. The world's
largest seed company raised its earnings outlook for fiscal year
2013 and posted strong first-quarter results.
Education provider Apollo Group and Dow component
Alcoa Inc, the largest U.S. aluminum producer, round out
the start of earnings season after the closing bell.