U.S. stocks slip after hitting record highs

The markets have lost steam after hitting record highs in the past month and a half, notwithstanding a one-off rally on Tuesday on strong earnings.

U.S. stocks slipped in a choppy session on Wednesday, struggling to sustain a rally from the previous session, as IBM snapped a run of strong blue-chips earnings and disappointing housing data dragged down Home Depot and homebuilders.

Helping temper losses was a rise in Netflix on strong subscriber numbers and a 1.33 per cent gain in financial stocks ahead of the release of the minutes of the Federal Reserve's September policy meeting at 2:00 p.m. ET (1800 GMT).

Investors have been fretting over the impact of tariffs, rising interest rates and wages on corporate profits and those concerns sparked a selloff last week.

The markets have lost steam after hitting record highs in the past month and a half, notwithstanding a one-off rally on Tuesday on strong earnings. Traders attribute the recent swings to normal volatility and some profit taking ahead of earnings.

"This is normal market volatility. And as tempting as it is to blame the last few days of volatility on something like trade disputes or rising interest rates or fears of growing inflation, those aren't new concerns," said Scott Clemons, chief investment strategist for Brown Brothers Harriman in New York.

"The pullback we had is nothing more than a flare in volatility that we usually get three or four times a year. It's just been a long time since we've seen it so it seems different but it's really quite normal."

IBM's shares slid 6.4 per cent after the company's quarterly revenue fell more than expected.

Home Depot dropped 4.4 per cent and Lowe's Cos fell 3.5 per cent after Credit Suisse downgraded the two home improvement retailers due, in part, to a dampening sentiment in the housing market - a weak spot in a robust economy.

Indeed, data on the day showed U.S. homebuilding dropped more than expected in September while rising borrowing costs knocked mortgage activity last week to its lowest since 2014. That sent the PHLX housing index sliding 1.90 per cent.

At 12:49 p.m. EDT the Dow Jones Industrial Average was down 63.98 points, or 0.25 per cent, at 25,734.44, the S&P 500 was down 2.53 points, or 0.09 per cent, at 2,807.39 and the Nasdaq Composite was down 21.95 points, or 0.29 per cent, at 7,623.54.

Among the brighter spots was Netflix, which rose 3.2 per cent, though it had pared some early gains, after reporting blowout subscriber addition numbers.

United Airlines shares climbed 5.7 per cent after a solid third-quarter profit and again raising it 2018 outlook. That also lifted other airline stocks.

Declining issues outnumbered advancers for a 1.75-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.59-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 11 new lows, while the Nasdaq recorded nine new highs and 62 new lows. 

(With inputs from agencies.)