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The drop could endanger a key talking point of the Obama campaign about the strong rise of the stock markets since he became president. Conservative market analysts said Tuesday that the recent rise had been a mere bubble creation anyway.

Derek Scissors, an economist at the Heritage Foundation, blamed the drop-off on the money that the Federal Reserve injected into the economy over the past month, which he says artificially inflated the markets.

“To me, the markets are overvalued,” he said. “This is just about money flashing around. A bunch of money gets dumped into the system, it’s got to go somewhere, so we get stock market run-ups, which makes it vulnerable to sharp drops like this. But money can flow out of the market just as easily.”

Since the end of the Great Recession, investors have rewarded companies for increasing profit, even if revenue growth has been unimpressive. And companies have turned in three years of growing profit. But companies can squeeze profit many ways, including cost-cutting, and revenue offers a truer read on customer demand. That is on investors’ minds as the world economy lumbers along.

Even the profit streak may be over. Financial analysts predicted that profit would fall at S&P 500 companies for July through September compared with the year before, which would end a three-year streak.

Foreign effect

Some of the disappointing revenue is because of weakness in foreign markets. Multinational companies are having a hard time selling to Europe, which has been hobbled by recession, and in emerging markets such as China and India, where growth is slowing. Businesses that had relied on growth there to offset weak U.S. consumer demand are being forced to come up with new strategies.

“The recession in Europe is very real,” said Bernard Schoenfeld, senior investment strategist for Bank of New York Mellon Wealth Management. “It’s not going to disappear very quickly, and it will certainly negatively affect earnings of exporters in the United States.”

United Technologies Corp., meanwhile, also dragged the markets down, even after a good third quarter, because it cut its sales forecast for the year. The stock fell 76 cents, or nearly 1 percent, to close at $77.07.

The Hartford, Conn.-based company reported Tuesday that third-quarter profit rose 6.9 percent — in large part because of its acquisition of Goodrich Corp. for $16.5 billion, which boosted sales. The company earned $1.42 billion, or $1.56 a share, compared with $1.32 billion in the same period last year. Revenue also was up 5.7 percent to $15 billion, but fell short of analysts’ estimates by nearly half a billion dollars.

But the stock fell as investors expressed concerns that the company cut its sales forecast for the year to $58 billion from $59 billion. The earnings forecast remains the same at $5.25 to $5.35 a share.

Facebook smiles

Facebook, the often-maligned stock, was one of the few bright spots for markets Tuesday, rising more than 13 percent to $22.13 in after-hours trading. The social networking giant beat Wall Street’s expectations for revenue and earnings, the first good news from the Palo Alto, Calif.-based company since it went public in May.

Facebook reported non-GAAP earnings of 12 cents a share, which beat estimates of 11 cents a share. It also reported a non-GAAP net income of $311 million.

The company also reported revenue of $1.26 billion, up from $954 million a year ago, which beat estimates of $1.23. billion.

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