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Stocks deflated by Europe; Nasdaq up

By Kate Gibson, MarketWatch –

NEW YORK — U.S. stocks closed with losses for two of three main indexes as investors mulled a European standoff over Greece’s debt and the latest slew of earnings, though the Nasdaq composite closed higher ahead of a batch of tech results.

“It’s probably normal to take somewhat of a breather after such a strong run in the early weeks of January,” said Laurence Creatura, portfolio manager at Federated Investors.

“The Greek situation has once again come to loggerheads, but investors have already paid for Grecian troubles, so they are not reacting very negatively to today’s news,” said Creatura.

After a 95-point drop, the Dow Jones industrial average closed down 33.07 points, or 0.3 percent, to 12,675.75.

The S&P 500 index declined 1.35 points, or 0.1 percent, to 1,314.65, breaking a five-day winning streak. Among the index’s 10 groups, telecommunications was hit the hardest and consumer discretionary fared best.

The Nasdaq composite rose 2.47 points, 0.1 percent, to 2,786.64. After the close of trading, Apple Inc., Yahoo Inc. and Advanced Micro Devices reported results.

In Europe, finance ministers took a tough position on how much money they would funnel to the Greek economy as Athens looked to get its private creditors to exchange their Greek government bonds for new ones worth far less than their face value.

The International Monetary Fund reduced its outlook for 2012 global growth to 3.3 percent from a September forecast of 4 percent, while cautioning Europe’s debt crisis jeopardized the world economy.

Travelers Cos. lost 3.8 percent, leading decliners on the Dow, after the insurer’s results disappointed.

And McDonald’s Corp.’s shares declined 2.2 percent after the fast-food chain projected its 2012 profit would be cut by the decline in the euro.

Johnson & Johnson shares ended flat after it forecast 2012 earnings under estimates but its chief executive told a conference call the health care company’s recall issues were behind it.

DuPont Co. edged up 0.1 percent after the chemical maker reported fourth-quarter earnings topping expectations.

Off the Dow, EMC Corp. jumped 7.3 percent after the storage-computer maker reported fourth-quarter profit that topped expectations, while Western Digital Corp. also advanced after Needham & Co. upgraded its rating on the disk-drive maker to buy from hold.

“Earnings have been OK, certainly nothing to get real excited about. On a company-by-company basis, some are pretty good; some are missing the mark. But year-over-year, earnings are growing, but certainly at a much slower rate,” said Paul Nolte, managing director at Dearborn Partners.

U.S. stock indexes eased back on their drop after the Richmond Federal Reserve’s regional manufacturing survey rose to 13.5 in January from 8.2 the month before.

“The figure today still points to a sector that is hanging in pretty well, notwithstanding the slowdown pressures in Europe and Asia,” said Peter Boockvar, equity strategist at Miller Tabak in New York.

The Federal Reserve on Tuesday began a two-day policy meeting that, when it ends Wednesday, will for the first time offer interest rate forecasts.

“There have been rumblings in the last few months about a QE3, so we might hear a little more about that,” said Nolte. “I would argue we don’t want it at this point,” he added of the central bank’s quantitative easing, saying it has largely served to boost the price of equities and commodities

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