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Stocks Slump as Coca-Cola Fizzle Suggests Consumer Slowdown

Stocks in this article: ^DJI ^GSPC ^IXIC NWSA KO GS MPC

NEW YORK ( TheStreet) -- Major U.S. stock averages dropped Tuesday as Coca-Cola Company (KO) reported sales that missed analyst forecasts, leaving traders uncertain about the trajectory for consumer spending.

The S&P 500 fell 0.37% to 1,676.26 while the Dow Jones Industrial Average slipped 0.21% to 15,451.85. The Nasdaq fell 0.25% to 3,598.50.

Coca-cola retreated 1.9% to $40.23 after the soda giant reported sales that fell short of expectations. Revenue for the quarter totaled $12.75 billion compared to a consensus target of $12.95 billion. The company attributed softer results on difficult weather and economic conditions.

"It's absolutely all on Coke, unfortunately, it just is," said Brian Amidei, managing director at HighTower Palm Desert, in a phone interview. Amidei said the market was using Coca-Cola's earnings to determine "the temperature of the consumer."

Goldman Sachs (GS) shares dropped 1.7% to $160.24, easing off earlier gains. Goldman on Tuesday reported earnings and revenue growth that significantly exceeded consensus analyst estimates. However, as with the first quarter of 2013, much of the bank's earnings beat was attributable to businesses that investors expect to decline in coming quarters.

Investors weighed an uptick in inflation ahead of Federal Reserve Chairman Ben Bernanke's scheduled appearance on Wednesday before a congressional committee.

The latest inflation report was doing little to dampen views that the Fed could announce a reduction in asset purchases in September. The consumer price index rose by a greater than expected 0.5% in June after rising 0.1% in May, according to the Bureau of Labor Statistics. Economists, on average, were expecting an increase of 0.3% in June, according to Thomson Reuters. Excluding food and energy costs, core prices advanced 0.2%, as expected, after rising by 0.2% in May.

Bernanke is slated to speak before the House Financial Services Committee in his semi-annual monetary policy report. Although his speech at the National Bureau of Economic Research in Cambridge, Mass. last week indicated continued easy monetary policy for some time to come, there remains the concern that tougher stances on policy might arise at the hearing matching views presented at the most recent gathering of the central bank's policymaking Federal Open Market Committee.

"We continue to anticipate healthy returns for the stock market this year," Robert Pavlik, the New York-based chief market strategist at Banyan Partners LLC wrote in a note. "Prior to reaching year-end we expect that short-term worries related to potential tapering by the Federal Reserve will combine with concerns related to China, Europe and an increase in gasoline to bring back market volatility." Banyan manages about $1.4 billion.

Diversified healthcare company Johnson & Johnson (JNJ) closed unchanged at $90.40 after beating second-quarter earnings estimates, driven by robust prescription drug and medical device sales, which overshadowed weak consumer products growth. Adjusted earnings came in at $1.48 a share on revenue of $17.88 billion versus the average analyst estimate of $1.39 a share in earnings on revenue of $17.71 billion.

Newscorp ( NWSA) broke a six-session losing streak on Tuesday, to become the top gainer in the S&P, advancing 4.2% to $15.28.

The biggest loser was Marathon Petroleum ( MPC ), which was down 4.3% to $69.93. The company predicted Monday softer second-quarter net income of $570 million to $600 million, or $1.75 to $1.85 a share, blaming renewable fuels laws for the potentially weaker results.

The benchmark 10-year Treasury was rising 1/32, diluting the yield to 2.539%.

Industrial production growth came in at greater-than-expected 0.3% in June after being unchanged in May, according to the Federal Reserve. Economists were expecting growth of 0.2% June capacity utilization was 77.8% versus the average economist expectation of 77.7% following May's upwardly-revised 77.7%.

In more economic headlines, builder confidence in the market for newly built, single-family homes rose six points to 57 on the National Association of Home Builders/Wells Fargo Housing Market Index for July. This is the index's third straight monthly gain and its strongest reading since January of 2006. Economists were expecting a print of 52.

Written by Andrea Tse and Joe Deaux in New York

>To contact the writer of this article, click here: Andrea Tse.>.

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