MCD McDonalds Corp

By Ellie Ismailidou and Sara Sjolin, MarketWatch

Shares of McDonald's tumbles after weak earnings; dollar slumps against yen

U.S. stocks erased early gains to turn lower Tuesday, weighed by a sharp drop in McDonald's Corp. after disappointing earnings.

Nervousness ahead of a fresh policy update from the Federal Reserve, due Wednesday, and choppy trading in oil futures, made for up-and-down early action in stocks.

The S&P 500 index was down 6 points, or 0.3%, at 2,163, led by a 1.3%% drop in telecom stocks. Only two of the index's 10 sectors were in positive territory, with materials stocks leading the gains, up 0.2%.

The Dow Jones Industrial Average fell 84 points, 0.5% to 18,407. A 2.3% jump in United Technologies Corp.(UTX) and a 1.6% climb in Caterpillar Inc.(CAT) failed to offset McDonald's decline, which was cutting more than 30 points from the blue-chips gauge.

Investors were reluctant to place any significant bets ahead of the Fed's policy statement, according to analysts. The central bank kicks off its meeting on Tuesday, its first gathering since the U.K. on June 23 voted to leave the European Union.

Among individual companies, shares of McDonald's Corp(MCD) slumped 4.5% after the world's largest fast-food restaurant chain missed earnings expectations (http://www.marketwatch.com/story/mcdonalds-shares-fall-after-revenue-same-store-sales-miss-expectations-2016-07-26), while lower oil prices continued to weigh on energy stocks.

Meanwhile, investors seemed to shrug off positive news from the housing market, where new home sales in June rose to a seven-year high (http://www.marketwatch.com/story/new-home-sales-power-ahead-rising-to-7-year-high-592000-annual-pace-2016-07-26)while the Case-Shiller home-price index also inched higher in May. Instead, the market was bracing for a deluge of earnings, including updates from Twitter Inc. and Apple Inc., due after the closing bell.

The Nasdaq Composite Index lost 8 points, or 0.2%, to 5,090.

"Right now everyone is--rightfully or wrongfully--focusing completely on Fed policy and earnings," said Kent Engelke, chief economic strategist at Capitol Securities Management.

Though the central bank is expected to hold interest-rates steady, there are more risks to the downside stemming from the content of its policy statement, according to Engelke.

Read:What to expect in the Fed statement (http://www.marketwatch.com/story/what-to-expect-in-the-fed-statement-next-week-2016-07-22)

"If the Fed comes out more hawkishly and earnings disappoint, [the Dow] could plunge up to 1,000 points," Engelke said, adding that there is a lot of "nervousness" which has sparked some profit taking.

At the same time, the main question on investors' minds is wether the recent weakness over the past couple of sessions was an aberration, particularly as negative earnings growth seems to be bottoming, said Tom Anderson, chief investment officer at Boston Private Wealth.

If the Fed signals rates might rise in the near future, this year's winners-- telecom and utilities which benefit from low interest rates and have surged over 20% this year--could come under pressure, according to Anderson. The theme was evident on Tuesday, when telecom and utilities were leading the losses, down 1.3% and 0.9% respectively.

Earnings deluge: Earnings were va major factor on investors' minds this week, with the busy lineup continuing on Tuesday.

Verizon Communications Inc.(VZ) fell 1.9% despite reporting second-quarter earnings that beat forecasts (http://www.marketwatch.com/story/verizon-q2-earnings-negatively-impacted-by-union-strike-but-above-expectations-2016-07-26). The company also mentioned its $4.83 billion deal on Monday to buy Yahoo Inc.'s (YHOO) assets for $4.83 billion in cash (http://www.marketwatch.com/story/verizon-agrees-to-48-billion-deal-to-buy-yahoo-2016-07-24), which is expected to close in the first quarter 2017.

DuPont(DD) gained 0.7% after the chemicals major reported earnings ahead of forecasts.

Under Armour Inc.(UA) fell 3.4% after the sportswear company said profit dropped in the second quarter (http://www.marketwatch.com/story/under-armour-earnings-fall-but-meet-expecations-2016-07-26).

United Technologies Corp.(UTX) rose 2.3% after reporting earnings and sales ahead of expectations and said its on track to meet its growth targets for 2020 (http://www.marketwatch.com/story/united-tech-profit-and-sales-beat-lifts-low-end-of-full-year-outlook-2016-07-26).

And after the market closes on Tuesday, Apple Inc.(AAPL), Twitter Inc.(TWTR) and Panera Bread Co.(PNRA) will report.

Read:Apple earnings: Another iPhone decline, stronger software revenue expected (http://www.marketwatch.com/story/apple-earnings-another-iphone-decline-stronger-software-revenue-expected-2016-07-22)

(http://www.marketwatch.com/story/apple-earnings-another-iphone-decline-stronger-software-revenue-expected-2016-07-22)Shares of Gilead Sciences Inc. (GILD) lost 8% after the biotech firm late Monday said revenue from its hepatitis C drugs fell 19% (http://www.marketwatch.com/story/gilead-sales-of-hepatitis-c-drugs-fall-19-2016-07-25-164854830) in the second quarter.

Economic news: The Markit PMI services index for July slowed to 50.9, a five-month low and down from 51.4 in June.

A measures consumer confidence (http://www.marketwatch.com/story/consumer-confidence-holds-steady-in-july-2016-07-26) from the Conference Board held steady in July, suggesting Americans are 'cautiously optimistic" that the U.S. economy will continue to grow.

See:

Other markets: The dollar fell against most other major currencies and particularly took a dive against the yen (http://www.marketwatch.com/story/yen-surges-against-dollar-other-rivals-as-japan-stimulus-plan-falls-short-2016-07-26) ahead of the Bank of Japan meeting on Friday. Expectations that the central bank will launch more aggressive monetary easing have started to fade, sending the yen to its highest level against the greenback since mid-July.

   Oil prices   continued to lose ground, while gold  rose 0.2% to $1,322.1 an ounce. 

Asian stock markets mostly rose, although Japan closed lower (http://www.marketwatch.com/story/nikkei-falls-after-disappointing-report-on-stimulus-plan-2016-07-25). European markets (http://www.marketwatch.com/story/european-stocks-slip-as-investors-weigh-corporate-updates-central-bank-moves-2016-07-26) traded mixed.

(END) Dow Jones Newswires

July 26, 2016 11:47 ET (15:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.