US stocks fall as IBM, United Tech pull down Dow in early trading

U.S. stocks fell in early afternoon trading on Tuesday as weak revenue at IBM and United Technologies weighed on the Dow and investors awaited results from tech giants including Apple and Microsoft.

The Dow fell over 1 percent, or about 209 points, with IBM and United contributing around 127 points to the fall.

IBM's shares fell as much as 6.3 percent to $162.43, a day after the company's revenue fell for the 13th consecutive quarter.

United Technologies fell as much as 7.9 percent to $101.78 and was the biggest loser on the Dow, after the company cut its full-year profit outlook.

Apple, Microsoft, and Yahoo are scheduled to report results after market close. Strong earnings from technology companies have been driving gains on the Nasdaq.

"We remain cautious regarding earnings because there is a lack of revenue growth," said John Toohey, head of equities at USAA Investments in San Antonio, Texas.

"For the bull market to be sustainable, we need to transition from financial engineering to organic revenue growth."

On Monday, the Nasdaq Composite touched a new intra-day high for the third straight day while the S&P 500 was just shy of its all-time high.

While markets are at record highs, June-quarter earnings of S&P 500 companies are expected to dip 1.9 percent, according to Thomson Reuters data.

Of the companies that have reported earnings so far, 70 percent have reported earnings above analyst expectations, above the 63 percent average beat rate since 1994.

However, 53 percent have topped revenue forecasts, below the 61 percent average beat rate since 2002. U.S. companies were expected to post their worst sales decline in nearly six years in the second quarter, in part due to the strong dollar that reduces the value of U.S. companies' overseas income.

The dollar index was down 0.8 percent at $97.22, and had earlier traded at its highest level since April on firming expectation of a U.S. interest rate hike later in the year.

"The U.S. market is slightly overvalued at the moment, and will be more than slightly overvalued if revenue growth does not pick up," Toohey said

The S&P 500 trades at 16.9 times forward 12 months earnings, above the 10-year median of 14.7 times.

At 13:01 p.m. ET (1701 GMT), the Dow Jones Industrial Average was down 206.51 points, or 1.14 percent, at 17,893.9, the S&P 500 was down 9.78 points, or 0.46 percent, at 2,118.5.

The Nasdaq composite was down 12.11 points, or 0.23 percent, at 5,206.75 with Apple's 0.8 percent fall being the biggest drag on the index. The company said it is experiencing some issues with its App Store, Apple Music, iTunes Store, and some other services.

Nine of the 10 major S&P indexes were lower with the telecommunications index leading the decliners with a 1.78 percent drop. Verizon Communications' 2.6 percent fall weighed the most on the index. The energy index was the lone index in the black.

Lexmark International slumped as much as 23.2 percent to $36.36, its lowest in 18 months, after the printer maker said it would cut 500 jobs, or about 4 percent of its global workforce.

Tesla fell 4.7 percent to $269.35 after UBS downgraded the stock to "sell" from "neutral." The downgrade is the third this month.

Thoratec jumped as much as 27 percent to a record high of $62.05 after Bloomberg reported that heart device maker St. Jude Medical is in talks to buy it. St. Jude was down 0.4 percent at $76.23.

Declining issues outnumbered advancers on the NYSE by 1,752 to 1,218. On the Nasdaq, 1,510 issues fell and 1,171 advanced.

The S&P 500 index showed 28 new 52-week highs and 21 new lows, while the Nasdaq recorded 83 new highs and 87 new lows.

(Editing by Don Sebastian)