Tucson CitizenTucson Citizen

Stocks dip as investors take profits after jump

NEW YORK – Caution returned to Wall Street Tuesday ahead of results of the government’s stress tests of banks.

Stocks dipped in early afternoon trading following a jump Monday that sent the Standard & Poor’s 500 index into positive territory for the year and the Dow Jones industrials up more than 200 points. Positive news on the housing market drove the gains.

“Today’s action, just drifting around, is not that surprising given Monday’s rally,” said Darin Newsom, a senior analyst at DTN in Omaha, Neb.

Analysts said the market had little reaction to comments from Federal Reserve Chief Ben Bernanke, who told Congress the economy should start growing again later this year. Bernanke did warn that even after a recovery begins, the economy will still show signs of weakness, but that caveat didn’t surprise investors.

“I thought in general, the comments were optimistic, but I’m not sure they told us anything new,” said Bill Stone, chief investment strategist at PNC Wealth Management.

A growing amount of upbeat economic data has driven stocks to their best two-month performance in nearly 35 years. However a number of dark clouds still hang over Wall Street, including growing unemployment and mixed news from first-quarter corporate earnings reports.

This week, two major news events could easily upset the market’s mood. Results are due out Thursday for the government’s “stress tests” on banks, and on Friday the government will report monthly employment data, one of the economic indicators most closely watched by investors.

The Dow fell 38.07, or 0.5 percent, to 8,338.67. The Standard & Poor’s 500 index fell 7.10, or 0.8 percent, to 900.14, while the Nasdaq composite index lost 21.89, or 1.2 percent, to 1,741.67.

Declining issues outnumbered advancers by nearly 2 to 1 on the New York Stock Exchange, where volume came to 729.7 million shares.

In other trading, the Russell 2000 index of smaller companies fell 6.85, or 1.4 percent, to 499.97.

Among the economic data Tuesday, a private report on the service sector showed a seventh straight month of contraction. However, the pace of decline slowed more than expected — further evidence that the economy’s slide is moderating.

The report did little to stoke buying, but the market’s pullback was minimal.

“We’re really not pushing the market that much lower right now,” Newsome said. “There is still this general sense that things have improved a bit.”

Investors are mindful that the stock market typically turns around, on average, about four months ahead of the economy. With Monday’s gain, the S&P 500 is up 34.1 percent since the rally began March 9. The Dow is up 28.7 percent.

But analysts warn that the market’s advance will continue to be put to the test.

“Over the past several weeks we’ve come through a period where all data was interpreted through rose-colored glasses,” said Lawrence Creatura, portfolio manager at Federated Investors. “Now, it’s a question of whether investors continue to have that perspective.”

Investors are particularly focused this week on the results of the stress tests, which will provide details on the U.S. banks in need of more capital. Reports have surfaced indicating that Citigroup Inc., Bank of America Corp. and Wells Fargo & Co., as well as a handful of regional banks, will be among those needing help.

On Tuesday, The Wall Street Journal said about 10 of the 19 banks undergoing the tests will be required to boost their capital levels as a buffer against potential future losses. The report cited several unidentified people familiar with the matter.

Regulators have said no large institution will be allowed to fail, and have pledged government funds if necessary. Though some investors are worried the report could indicate more pain in the industry than previously thought, many analysts say results of the tests are largely priced into the market already.

Financial stocks were mixed Tuesday. Bank of America Corp. shares jumped 69 cents, or 6.7 percent, to $11.07, while Wells Fargo & Co. shares slipped 68 cents, or 2.8 percent, to $23.57.

In earnings news, Dow component Kraft Foods Inc. said its first-quarter profit rose a better-than-expected 10 percent even as sales dropped. Shares of the maker of Velveeta, Oreo cookies and Maxwell House coffee jumped more than 5 percent, adding $1.31, or $25.57.

Chesapeake Energy Corp. posted a nearly $6 billion loss for the first quarter because of tumbling natural gas prices. Shares plunged $2.43, or 10.7 percent, to $20.39 amid a broad decline in energy stocks.

Bond prices dipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, inched up to 3.17 percent from 3.16 percent late Monday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 69 cents to $53.78 on the New York Mercantile Exchange.

Overseas, Hong Kong’s Hang Seng index inched up 0.3 percent. Britain’s FTSE 100 jumped 2.6 percent, Germany’s DAX index slipped 0.02 percent, and France’s CAC-40 rose 0.4 percent. Markets in Japan were closed for a national holiday.

Citizen Online Archive, 2006-2009

This archive contains all the stories that appeared on the Tucson Citizen's website from mid-2006 to June 1, 2009.

In 2010, a power surge fried a server that contained all of videos linked to dozens of stories in this archive. Also, a server that contained all of the databases for dozens of stories was accidentally erased, so all of those links are broken as well. However, all of the text and photos that accompanied some stories have been preserved.

For all of the stories that were archived by the Tucson Citizen newspaper's library in a digital archive between 1993 and 2009, go to Morgue Part 2

Search site | Terms of service