Stocks Erase Worst of Losses

Aside from the earnings, investors also were handed more bad news about the housing market from the National Association of Realtors. The NAR said that existing-home sales fell a greater-than-expected 8% in September to an annual rate of 5.04 million units, considerably worse than expectations.

Ian Shepherdson, chief economist with High Frequency Economics, said the latest housing data will force the Fed to lower the fed funds rate by 25 basis points when it meets next week.

"Prices will keep falling. The housing crunch is accelerating," he said. "The Fed can't stand by and watch."

Following the housing data, Treasury securities rallied. The 10-year note was up 16/32 in price, cutting the yield to 4.34%. The 30-year bond added 26/32 in price, yielding 4.64%.

While Amazon and Merrill were hogging the earnings spotlight, plenty of other companies were out with reports.

Dow member Boeing (BA Quote) and tech giant Corning (GLW Quote) both beat Wall Street's estimates for the current quarter, but each offered sluggish guidance. Corning dropped 6.2% to $23.20, and shares of Boeing slumped 0.7% to $94.26.

Northrop Grumman (NOC Quote) also notched an earnings beat and boosted its forecast for 2007. Coca-Cola Enterprises (CCE Quote) met expectations for the third quarter and guided higher for the fiscal year.

Northrop added 3.4% to $82.25, and Coca-Cola Enterprises finished higher by 2% at $25.