US Stocks Take a Step Back 08 May 2009

Stocks in New York were selling off slightly heading into midday, with even financials fizzling after a strong start, as investors absorbed the latest earnings, economic data and stress test speculation.


The Dow Jones Industrial Average was lower by 102.43 points to 8409.85, while the S&P 500 was down 12.14 points at 907.39. The Nasdaq was off by 42.86 points at 1716.24.


Stocks opened to the upside, but fell back slightly midmorning. Around that time Federal Reserve Chairman Ben Bernanke was emphasizing the importance of supervision of financial institutions at the Federal Reserve Bank of Chicago Conference on Bank Structure and Competition.

"The events of the past two years have revealed weaknesses in both private-sector risk management and in the public sector's oversight of the financial system," said Bernanke in his prepared remarks. "The Federal Reserve has engaged in extensive introspection and review of the lessons of the crisis and is working diligently to implement what had been learned.

The banks held up better than other sectors, but the KBW Bank Index was recently flat, and the Financial Selects Sector SPDR, which tracks the financial stocks in the S&P 500, was lower by about half a percentage point, with stress test results due out later in the day.

Wells Fargo and Morgan Stanley were recently lower by more than 5% each. Bank of America and Citigroup were still up 12% and 3%, on the Dow.

April retail numbers and more first-quarter earnings offered some upside early on. Among them, Wal-Mart reported better than expected sales for April, and Target said its first-quarter profit will be "well above" Wall Street's view. On the downside, Macy's sales fell more than expected, and J.C. Penney, although it forecast an unexpected first-quarter profit on stronger-than-expected April sales, said its May sales will lag April.

General Motors topped Wall Street expectations with its first-quarter results, but burned through $10.2 billion of cash in the first quarter.
Then the U.S. government reported that initial jobless claims fell to 605,000 last week, vs. expectations for 635,000, which was equal to the upwardly revised number of new claims the week prior.

Stocks advanced on Wednesday as ADP reported a far lower amount of job losses in the private sector in April than expected and as the capital shortfalls circulating in various reports ahead of the stress test results struck investors as low.

In the latest news, Bank of America, Wells Fargo, GMAC, Citi, Morgan Stanley, Regions Financial, State Street, KeyCorp and Capital One are all rumored to be in need, according to various media and analyst reports.
Goldman Sachs, JPMorgan Chase and American Express are rumored to be fine.

Know though, that none of these banks have officially confirmed or denied any reports, save Bank of America saying one report early this week was inaccurate. The KBW Bank Index was rising 3% early, nonetheless, as financials continued to rally ahead of the actual report.