Banks Lead Rare Selloff on Wall Street; Dow Falls 97

Wall Street took its largest tumble in more than a month on Tuesday as the Dow fell nearly 100 points amid sinking banking stocks and apprehension ahead of the conclusion of the Federal Reserve’s two-day policy meeting.
A recurrence of investors' anxiety about the economy Tuesday gave Wall Street its biggest loss in five weeks. Investors feared that the market's steep gains in the past month could unravel if the economy doesn't show more signs of strengthening. Warnings about the health of banks and uneasiness ahead of the Federal Reserve's economic statement Wednesday led investors to dump financial stocks and wade into defensive areas like consumer staples companies and government debt.

Financial stocks, which had gained about 25 percent in the last month, tumbled after Rochdale Securities analyst Richard Bove painted a gloomy outlook for the banking industry. He said bank stocks are trading on "fumes," and he expects a short-term pull-back in their stock prices.

Today’s Markets
The Dow Jones Industrial Average fell 96.50 points, or 1.03%, to 9241.45, the Standard & Poor's 500 slid 12.75 points, or 1.27%, to 994.35 and the Nasdaq Composite tumbled 22.51 points, or 1.13%, to 1969.73.

For the week:
The Dow is down 128.62, or 1.4 percent.
The S&P is down 16.13, or 1.6 percent.
The Nasdaq is down 30.52, or 1.5 percent.
For the year:
The Dow is up 465.06, or 5.3 percent.
The S&P is up 91.10, or 10.1 percent.
The Nasdaq is up 392.70, or 24.9 percent.

The markets have now ended in the red in four of the past five sessions, with Friday's 114-point jump being the lone exception. Wall Street's four-week surge, which pushed the Dow up 15%, appears to have run out of steam as the bulls failed to rally Tuesday around a solid bond auction and the biggest jump in productivity in nearly six years.

“They look a little tired to me,” remarked NYSE trader Ted Weisberg of Seaport Securities. “It doesn’t mean we’re going to zero or back to where we were in March, but it looks to me like they’re rolling over and we’re pulling back.”

Still, the fact that Tuesday's slide represents the steepest pullback since July 7 is striking, especially when compared with the volatility and fear that regularly sent the Dow to triple-digit plunges earlier this year. That fear has receded as economic data and quarterly results suggest a second-half recovery for the U.S. economy.
“It has been a quiet rise through all of July. At least over the short term, there is some underlying strength in the market,” said Paul Nolte, director of investments at Hinsdale Associates. “Maybe investors sitting on cash are jumping aboard at this point.”

Almost all 30 components of the Dow closed lower, led by financial giants General Electric, Bank of America and JPMorgan Chase. Two of the only blue-chip stocks making headway were DuPont and Wal-Mart.

The selloff in the financial sector came after influential analyst Dick Bove of Rochdale Securities said bank stocks are trading on “fumes” and recommended taking short-term profits. At the same time, regional banks like Huntington Bancshares tumbled after Miller Tabak cut its price targets on Zions Bancorp and Regions Financial.
Global Markets
European stocks took their largest one-day tumble since early July. London's FTSE 100 slid 1.08% to 4671.34, Germany's DAX slumped 2.44% to 5285.81 and France's CAC 40 fell 1.38% to 3456.18.

Asian markets closed higher overnight as Japan's Nikkei 225 rose 0.58% to 10585.46 and Hong Kong's Hang Seng climbed 0.69%.