* Alcoa beats expectations but cautions of slowdown
* Yum Brands defies China sluggish growth, raises outlook
* True Religion exploring sale, shares jump
* Indexes: Dow off 0.31 pct, S&P off 0.13 pct, Nasdaq up
By Chuck Mikolajczak
NEW YORK, Oct 10 (Reuters) - U.S. stocks dipped on Wednesday
as earnings season began with Alcoa forecasting slower demand
for aluminum, while a profit warning from Chevron weighed on the
But declines were muted as Yum Brands Inc, climbed 8
percent to $70.99 and was the best performer on the S&P 500. The
parent company of KFC and other fast-food restaurants raised its
full-year outlook after sales in China held up despite slowing
The overall tone at the start of the earnings season was
downbeat, however. The S&P 500 index was on pace for its fourth
day of declines over concern the global economic slowdown was
hurting profits and causing companies to lower their outlooks.
The index was testing the technical support level of 1,440.
Stronger demand from airplane and automobile producers
helped Alcoa, the largest U.S. aluminum producer, to
report third-quarter results that beat analysts' expectations.
Still, Alcoa fell 3.1 percent to $8.85 as the biggest percentage
decliner on the Dow.
Chevron Corp dipped 3 percent to $113.80 as the
biggest drag on the S&P 500 after the second-largest U.S. oil
company warned third-quarter profits would be "substantially
lower" than in the previous quarter. Chevron said a hurricane
and maintenance curbed its oil and gas output and a fire hit its
Lackluster growth in China, the world's second-largest
economy, is expected to rein in corporate earnings in the third
quarter and dent profit forecasts as the Asian nation feels the
pinch of the debt crisis in the euro zone, a key trading
"You've seen very cautionary earnings results and even
forward guidance. Alcoa has good earnings, but their forward
guidance is lackluster. It points to a slow China and slow
global growth," said Richard Weeks, managing director at
HighTower Advisors in Vienna, Virginia.
The Dow Jones industrial average dropped 42.05
points, or 0.31 percent, to 13,431.48. The Standard & Poor's 500
Index shed 1.83 points, or 0.13 percent, to 1,439.65. The
Nasdaq Composite Index gained 1.18 points, or 0.04
percent, to 3,066.21.
The International Monetary Fund and the World Bank have
recently cut world growth forecasts, citing concerns about
Engine maker Cummins Inc lowered its 2012 forecast
for a second time this year, citing delays in customer spending
due to a weakening global economy, and said it would cut up to
1500 jobs. Cummins shares dropped 2.6 percent to $88.45.
The cautious outlooks are the latest in a string of
forecasts from large multinational companies, including FedEx
Corp, Caterpillar Inc and Hewlett-Packatrd Co
Analysts forecast third-quarter earnings of Wall Street's
S&P 500 companies would fall 2.3 percent from the
year-ago quarter, according to Thomson Reuters data, which would
be the first drop in U.S. quarterly earnings in three years.
According to data through Tuesday, 94 companies in the
benchmark S&P index have issued negative outlooks, compared with
23 positive pre-announcements, for a ratio of 4.1, the weakest
showing since the third quarter of 2001.
FedEx said it plans to slash costs at its
underperforming express air freight and services divisions, with
profit improvements of $1.7 billion planned at those operations
over the next four years. Shares gained 5.5 percent to $90.30.
U.S. data showed wholesale inventories rose 0.5 percent, as
expected, in August. Investors will also look to the Federal
Reserve's Beige Book at 2 p.m (1800 GMT) for the U.S. central
bank's assessment of the economy.
Earnings from warehouse chain Costco Wholesale Corp
were a bright spot as the company reported a 27 percent jump in
quarterly profit on higher sales and membership fees. Costco
shares were up 4 percent to $103.60.
True Religion Apparel Inc surged 22.2 percent to
$25.67 after the denim maker said it was evaluating strategic
alternatives, which could include a possible sale of the
company, after receiving indications of interest from third