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US stocks fell on profit-taking, bank stress tests

US stocks fell on profit-taking, bank stress tests
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First Published: Wed, May 06 2009. 08 31 AM IST
Updated: Wed, May 06 2009. 08 31 AM IST
New York: US stocks fell on Tuesday as cautious investors fretted about impending bank stress test results and energy shares succumbed to the pressure of lower oil prices.
The drop halted a two-day run-up that had propelled the S&P 500 into positive territory for the year-to-date. The benchmark index had risen 34% after touching a 12-year lows in early March.
Selling was seen across the board with big-cap technology companies, banks, home builders and big manufacturers dragging indexes lower. These sectors have all been among the market’s bright spots during the two-month rebound.
Shares of energy company Chevron, down 1.4% at $65.75, were among the Dow’s drags, along with those of No.2 US bank JPMorgan, which ended off 2.7% at $34.82.
“There’s a little bit of profit-taking today. You’re also probably having a bit of a breather going into Thursday, with the stress test results although most people think this will somewhat be a non-event,” said John O’Brien, senior vice president at MKM Partners LLC in Cleveland.
The Dow Jones industrial average dipped 16.09 points, or 0.19%, to 8,410.65 points. The Standard & Poor’s 500 Index shed 3.44 points, or 0.38%, to 903.80. The Nasdaq Composite Index dipped 9.44 points, or 0.54%, to 1,754.12.
Shares of software maker Microsoft Corp, off 2% at $19.79, was the Nasdaq’s top drag, followed by Hologic Inc, whose shares plunged 20.2% to $12.45, a day after the medical diagnostics maker delayed the U.S. launch of its Tomosynthesis mammography system and posted a quarterly loss.
Procter & Gamble was the Dow’s top drag, down 2.4% at $49.79, after news of problems at one of its manufacturing plants.
After the bell, shares of Walt Disney Co, another Dow component, rose 2% to $23.61 after the No. 1 US entertainment company posted a quarterly profit above Wall Street’s forecasts. Disney had ended the regular session up 1.3% at $23.15.
Increasingly less dire economic reports have boosted optimism that the economic recession that began in December 2007 may be abating, while some renewed confidence about the banking sector underpinned sentiment.
Even so, investors fretted about the looming release of government stress test results - expected on Thursday - which may show about half of the 19 biggest banks under review need to raise more capital.
The KBW Bank index - which through Monday had risen 88% since 9 March, slipped 1.6% - with Wells Fargo down 4.04% to $23.27, but Citigroup gained 3.4% to $3.31.
Investors are optimistic that the largest banks do not need dramatic new government interventions. Among banks undergoing the tests, Citigroup, for example, has been told it will need to boost its common equity by about $10 billion, a person familiar with the matter said on Monday.
Tuesday’s economic data showed that the vast services sector contracted less severely in April.
Also on Tuesday, Federal Reserve Chairman Ben Bernanke said the three-year US housing bust may be near a bottom and that he expected the recession to end this year, barring a relapse of the financial crisis. However, he also noted US growth would remain subdued and unemployment high.
US front-month crude shed 63 cents, or 1.16%, to settle at $53.84 a barrel on the New York Mercantile Exchange, while the S&P Energy index slid 1.3%. The Dow Jones home construction index dropped 1.8%.
Kraft Foods helped cushion losses on the Dow after the maker of household brands including Oreo cookies, reported a higher profit.
Trading volume was active on the New York Stock Exchange, with about 1.53 billion shares changing hands, above last year’s estimated daily average volume of 1.49 billion, while on Nasdaq, about 2.56 billion shares traded, also above last year’s daily average of 2.28 billion.
Advancing stocks outnumbered declining ones by a ratio of about 6 to 5 on both the NYSE and Nasdaq.
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First Published: Wed, May 06 2009. 08 31 AM IST
More Topics: Markets | US | Stocks | Economy | Recession |