updated 10/12/2006 9:19:53 AM ET 2006-10-12T13:19:53

Stocks pulled back Wednesday after aluminum producer Alcoa Inc. kicked off earnings season with a weaker-than-expected profit report and minutes from the Federal Reserve’s last meeting stoked concerns about the economy.

Major Market Indices

Stocks fell sharply Wednesday afternoon following reports that an aircraft crashed in New York City , but rebounded when government officials said the incident didn’t appear to be the result of terrorism.

Though earnings news loomed large on Wall Street, many investors had been focused on gaining a clearer picture of where the Fed stood on interest rates and inflation. The Fed minutes dashed hopes, however slim, that the central bank would soon consider lowering interest rates and raised questions about the well-being of the economy.

“These minutes give no hint that the Fed is going to ease. The markets have this kind of dovish Fed in mind that is itching to pull the trigger to cut rates,” said Ethan Harris, chief U.S. economist at Lehman Brothers Inc. “Some of the talk in the stock market about the Fed giving them a little present in the form a rate cut is overly optimistic.”

The notion that the economy is slowing adequately to reduce inflation has given stocks a boost in recent weeks, helping push the Dow Jones industrial average to a string of record-setting sessions. The Dow set another closing record Tuesday, shortly before the report from Alcoa.

The Dow Jones industrial average finished Wednesday down 15.04 points, or 0.13 percent, while the broader Standard & Poor’s 500-stock index was lower by 3.47 points, or 0.26 percent. The Nasdaq composite index gave up 7.16 points, or 0.31 percent.

Bond prices fell, with the yield on the benchmark 10-year Treasury note rising to 4.78 percent from 4.76 percent late Tuesday. The dollar was down against other major currencies, while gold prices rose. Light, sweet crude fell 93 cents at $57.59 on the New York Mercantile Exchange.

The market’s decline came despite a report that the federal budget deficit fell to about $247.7 billion in 2006 , the lowest in four years.

Alcoa’s quarterly report traditionally kicks off earnings season and appeared to fuel concerns earlier in the day that corporate profits have not held up well as the economy has cooled. Alcoa said seasonal slowness and lower metal prices hurt third-quarter results. The news displeased investors despite an 86 percent increase in profits. The Dow component fell $1.44, or 5.09 percent, at $26.85.

“I don’t think today’s events are a sign of a trend. I think in the aggregate, (earnings) will still beat the consensus expectations,” said Steven Goldman, chief market strategist at Weeden & Co.

Another materials producer, Monsanto Co., which makes herbicide and other agricultural products, said Wednesday its fiscal fourth-quarter loss widened as sales fell in its seeds and genomics segment. The company, which fell $2.46, or 5.30 percent, at $43.95, issued a fiscal 2007 forecast that came in well below Wall Street’s expectation.

Mutual-fund manager Legg Mason Inc. slid $18.16, or 17.24 percent, at $87.15 after warning that its fiscal second-quarter profit would fall well short of Wall Street’s forecast. The warning is the company’s third in a row since gaining control of Citigroup Inc.’s asset-management business late last year.

Genentech Inc., the biotechnology company, fell $1.45 at $84.15 after third-quarter sales of several of its drug treatments missed Wall Street’s forecasts. Its overall profit was up 58 percent, aided by a strong start for an eye-disease drug.

CNET Networks Inc., which publishes technology news online, said Shelby Bonnie resigned as its chairman and chief executive after a review of the company’s stock-options practices. CNET fell 76 cents to 7.68 percent at $9.14.

McAfee Inc. rose 85 cents, or 3.30 percent, at $26.64. The maker of antivirus software said it fired President Kevin Weiss , and announced that CEO and Chairman George Samenuk would retire after a stock options inquiry found accounting problems that will result in a restatement of financial results.

Overseas, Japan’s Nikkei stock average closed down 0.47 percent. Britain’s FTSE 100 closed up 0.01 percent, Germany’s DAX index rose 0.03 percent and France’s CAC-40 was up 0.06 percent.

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