Bank Results Push Down Stocks S&P 500 Posts Biggest Drop in 2 Months; Dow Nearly Flat Stocks suffered their steepest one-day drop in nearly two months, but you wouldn't have known it by looking at the blue-chip Dow Jones Industrial Average.
That index fell a mere 12.64 points, or 0.11%, to 11825.29. But the broader Standard & Poor's 500-stock index tumbled 13.10 points, or 1.01%, to 1281.92. That was the biggest one-day drop for the S&P 500 since Nov. 23 and comes after a seven-week run that saw the markets trickle steadily 7.8% higher.
The difference was the product of the two index's different constituents. The Dow, which tracks 30 of the biggest blue-chip stocks in the U.S., doesn't include some of the day's biggest losers—including Ford Motor, Office Depot, steelmakers U.S. Steel and AK Steel Holding and financial institutions Northern Trust, Regions Financial, State Street and Goldman Sachs. Each of those stocks tumbled 4% or more on Wednesday, as weak earnings from big banks sent investors into safer assets.
Small-cap stocks fared particularly badly, with the Russell 2000 Index sliding 2.6%, its biggest one-day fall since August.
As investors dumped stocks, they sought refuge in Treasurys, which rose across the board to push the yield on the benchmark 10-year note down to 3.339%.
"This was due; for the past four months, the market has almost gone straight up," Mr. Auer said. "Four months without even shaking the tree? I don't think this is too bad."
Wednesday's declines were led by financial giants Bank of America and American Express, the Dow's two weakest components. Amex lost 2.4% after the card company projected fourth-quarter earnings slightly below Wall Street estimates and said it will cut about 550 jobs as it consolidates some facilities. BofA fell 4.2% ahead of its earnings results on Friday, amid general gloominess around the country's largest banks.
A crop of disappointing bank earnings soured the market's mood on financials, one of the biggest beneficiaries of the recent rally on the stock market.
The biggest letdown came from Goldman Sachs, which saw its fourth-quarter earnings narrowly beat Street estimates but fall short on revenue. Shares of Goldman fell 4.7%, while rival Morgan Stanley sank 3.5%.
Northern Trust sank 5.7% after its fourth-quarter earnings dropped 22% as persistently low interest rates constrained the trust-and-custody bank's interest income and trust fee levels. State Street fell 4.1% after fourth-quarter profit plunged 84% on charges, and the money manager said it would reduce its work force by 1,400 employees and trim its real-estate holdings.
Wells Fargo fell 2.1% after its fourth-quarter earnings just met expectations, though the bank posted stronger-than-expected revenue. J.P. Morgan Chase fell 2.3%, while Citigroup was off 0.8%.
Materials also lagged behind as commodity prices sagged, with U.S. Steel off 5.9% and AK Steel Holding falling 4.4%. Monsanto was also down 4.6%. Copper fell 1.3%, while crude-oil prices slipped to below $91 a barrel. Gold futures edged up.
Technology stocks were also a drag, with the tech-heavy Nasdaq Composite falling 40.49 points, or 1.46% to 2725.36.
Shares of Apple finished down 0.5% in choppy trading after the consumer-electronics company said first-quarter net income jumped to $6 billion, or $6.43 a share from $3.38 billion, or $3.67 a share, for the same period last year. Revenue jumped more than 70% to $26.74 billion on strong holiday sales of the iPhone and iPad. The declines add to Apple's 2.2% drop on Tuesday, after the company announced Chief Executive Steve Jobs would be taking another medical leave.
The day's U.S. economic data was mixed. Housing starts fell 4.3% in December to a seasonally adjusted annual rate of 529,000 from a downwardly revised 553,000 a month earlier, the Commerce Department reported. Economists had expected overall housing starts to fall only slightly in December to a rate of 554,000. However, building permits, a gauge of future construction, surged 16.7% to an annual rate of 635,000. http://online.wsj.com/article/SB10001424052748704590704576091510567834944.html?mod=WSJ_Markets_RightMostPopular
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