Lackluster earnings reports send Wall Street lower
Nagging worries about banks upended a stock market rally Wednesday.
Volatile financial stocks steered the overall market for the third straight day after Morgan Stanley and credit card issuer Capital One Financial posted lackluster quarterly reports.
On Monday, bank shares tumbled after Bank of America warned of further loan losses. They rebounded Tuesday after Treasury Secretary Timothy F. Geithner told Congress that most banks were well-capitalized.
Wednesday’s jumpy trading came as first-quarter results released by AT&T;, Boeing and McDonald’s contained glimmers of hope about consumer spending and the economy in general.
“We’re starting to see a little light at the end of the tunnel,” said Frank Ingarra, co-portfolio manager at Hennessy Funds. “The challenge is, I don’t know how long the tunnel is.”
The Dow Jones industrial average fell 82.99 points, or 1%, to 7,886.57. The Standard & Poor’s 500 index fell 6.53 points, or 0.8%, to 843.55.
But the technology-dominated Nasdaq composite index rose 2.27 points, or 0.1%, to 1,646.12.
The Russell 2,000 index of smaller companies rose 0.1%.
Rising stocks outpaced those that fell by about 8 to 7 on the New York Stock Exchange.
With bank earnings mostly in hand, investors are now focused on the results of the government’s “stress tests” of big banks, said Anton Schutz, portfolio manager of Burnham Financial Industries Fund and Burnham Financial Services Fund.
The late slide in bank stocks Wednesday reflected fear over what those tests might reveal. Results of the tests, which are designed to determine whether major financial institutions will need more government bailout money, are scheduled to be released May 4.
Morgan Stanley slumped 9% after reporting it lost $177 million and reduced its dividend. The company said it was hurt in part by a deteriorating commercial real estate market.
Wells Fargo slid 3.4% after confirming it earned $3.05 billion in the first quarter, up from $2 billion a year earlier.
Among other players in the financial sector, Bank of America dropped 5.7%, to $8.26, while an index of 24 bank stocks gained 4.9%.
Technology shares fared better.
Apple slipped 25 cents to close at $121.51 but rose nearly 3% in after-hours trading after reporting a better-than-expected 15% rise in profit.
EBay reported better-than-expected earnings after the closing bell. Its stock rose 49 cents, or 3.4%, to $14.78 in regular trading, then rose as high as $16 in after-hours trading.
In other market highlights:
* AT&T; rose 46 cents to $25.74. It said strong results from its wireless business softened the effect of the weak economy and helped the phone giant beat analyst estimates for the first quarter.
* The Treasury market was mixed. The yield on the 10-year T-note rose to 2.96% from 2.9% late Tuesday.
* The dollar was mixed against other major currencies, while gold prices rose.
* Overseas, key stock indexes rose 1.1% in Britain, 2.1% in Germany, 1.7% in France and 0.2% in Japan.
