Caterpillar Squashed

Updated from 1:07 p.m. EDT

At record highs, the Dow Jones Industrial Average felt one of its pillars crumble on Friday as Caterpillar (CAT Quote) recorded a big earnings shortfall.

The industrial giant and Dow component, whose stock had been up 44% so far in 2007, posted a 21% drop in second-quarter profits and missed Wall Street's expectations. The company recorded sales strength from outside North America, but its bottom line was hit by higher costs and weakness in the U.S. residential construction market -- as well as the broader economy.

Shares recently were down $5.91, or 6.8%, to $81.07 ...