U.S. 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 percent 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
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 <.DJI> dipped 16.09 points, or 0.19 percent, to 8,410.65 points. The Standard & Poor's 500 Index <.SPX> shed 3.44 points, or 0.38 percent, to 903.80. The Nasdaq Composite Index <.IXIC> dipped 9.44 points, or 0.54 percent, to 1,754.12.
Shares of software maker Microsoft Corp
Procter & Gamble
DISNEY UP LATE, STRESS TESTS LOOM
After the bell, shares of Walt Disney Co
Disney had ended the regular session up 1.3 percent 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 <.BKX> -- which through Monday had risen 88 percent since March 9, slipped 1.6 percent -- with Wells Fargo
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 U.S. 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 U.S. growth would remain subdued and unemployment high.
U.S. front-month crude shed 63 cents, or 1.16 percent, to settle at $53.84 a barrel on the New York Mercantile Exchange, while the S&P Energy index slid 1.3 percent. The Dow Jones home construction index <.DJUSHB> dropped 1.8 percent.
Like many companies this earnings season, Kraft said its results were helped by raising prices and cutting costs, sending its shares up nearly 4 percent to $25.22.
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.