Stocks experienced considerable volatility over the course of the trading day on Wednesday, with the major averages unable to sustain any significant moves. The choppy trading came as investors continued to digest mixed earnings news.

Early on in the session, traders reacted negatively to quarterly results from Morgan Stanley (MS), which became one of the few major financial companies to report weaker than expected first quarter results.

Morgan Stanley reported a much wider than expected first quarter loss of $0.57 per share and revealed that it has slashed its quarterly dividend by 80 percent to $0.05 a share.

Separately, Boeing (BA) reported first quarter net income of $610 million, down 50 percent from last year quarter's $1.21 billion. Revenues for the quarter rose 3 percent to $16.5 billion from last year's $15.99 billion.

Looking forward, the aerospace giant reaffirmed its full year revenue guidance but lowered its earnings guidance due to lower earnings at its commercial airplanes business.

Meanwhile, fast food giant McDonald's (MCD) reported first quarter net income of $0.87 per share, compared to $0.81 per share in the same quarter of last year, while analysts expected the company to report earnings of $0.82 per share.

In other news, Treasury Secretary Timothy Geithner spoke to the Economics Club of Washington earlier in the day, hinting that policymakers might be forced to alter their recovery strategies as the global financial crisis drags on.

He explained that the revised estimate from the International Monetary Fund for global growth could spark a change in policy. The IMF lowered its 2009 outlook, now predicating a contraction of 1.3 percent for the year compared to its previous estimate of 0.5 percent growth.

We may have to adapt our policies further as conditions evolve, and we need to make sure we provide a scale of support that matches the intensity of the challenge, Geithner said.

The major averages pulled back sharply going into the close, with the Dow and the S&P 500 falling firmly into negative territory. While the Nasdaq managed to hold onto a modest gain, closing up 2.27 points or 0.1 percent at 1,646.12, the Dow closed down 82.99 points or 1.0 percent at 7,886.57 and the S&P 500 closed down 6.53 points or 0.8 percent at 843.55.

Sector News

The late-day pullback by the markets was partly due to significant weakness that reemerged in the banking sector, with the Kbw Bank Index closing down 4.9 percent after bouncing back and forth across the unchanged line throughout the trading session.

Among banking stocks, shares of KeyCorp (KEY) showed a notable decline, ending the session down 12.8 percent. With the loss, KeyCorp ended the session at its worst closing level in well over a month, although it remains stuck in the trading range seen for the past several months.

Significant weakness was also visible in the pharmaceutical sector, as reflected by the 2.5 percent loss posted by the Amex Pharmaceutical Index. The index added to the losses posted in the two previous sessions to end the day at a more than one-month closing low.

While real estate, airline, and utilities stocks also ended the day notably lower, trucking stocks managed to hold onto strong gains. With Ryder (R) leading the way higher after reporting better than expected earnings, the Dow Jones Trucking Index closed up 4.9 percent.

Electronic storage and semiconductor stocks also managed to end the day higher, contributing to the modest gain posted by the tech-heavy Nasdaq. The Amex Disk Drive Index closed up 4.9 percent, while the Philadelphia Semiconductor Index rose 4.3 percent.

Some strength also remained visible among housing stocks, with the Philadelphia Housing Index closing up 2.3 percent. At its high for the session, the index was at a four-month intraday high, although it moved to the downside going into the close.

Dow Components

A majority of the Dow components ended the session in negative territory, contributing to the steep loss posted by the blue chip index. Reflecting the weakness in the banking sector, Bank of America (BAC) turned in one of the worst performances, closing down 5.7 percent.

Pfizer (PFE) also showed a notable decline, moving lower along with most other drug stocks. Shares of Pfizer closed down 3.6 percent, at their worst closing level in over a month.

The late-day pullback by the Dow also reflected notable declines by McDonald's, Procter & Gamble (PG), Johnson & Johnson (JNJ), and Merck (MRK).

Meanwhile, Caterpillar (CAT) managed to end the session up 3.4 percent after JP Morgan upgraded its rating on the construction equipment maker to Overweight from Neutral. Intel (INTC) also held onto a 2 percent gain amid the strength in the semiconductor sector.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Wednesday. While notable strength was visible in South Korea, the markets in Hong Kong and mainland China experienced considerable weakness.

Meanwhile, the major European markets all ended the day firmly in positive territory. The U.K.'s FTSE 100 Index finished the session up 1.1 percent, while the French CAC 40 Index and the German DAX Index advanced 1.7 percent and 2.1 percent, respectively.

In the bond markets, treasuries ultimately closed just off their worst levels of the day, substantially below the unchanged line. Subsequently, the yield on the benchmark 10-year note closed up 6.2 basis points at 2.964 percent.

Looking Ahead

Earnings are likely to remain in focus on Thursday, with Marriott International (MAR), Hershey (HSY) and UPS (UPS) among the companies due to release their results before the start of trading.

Additionally, traders will also react to the release of earnings reports from eBay (EBAY) and Apple (AAPL) after the close of trading today.

Thursday is also a big day on the economic front, with weekly jobless claims data due out at 8:30 a.m. ET and existing home sales scheduled to be released at 10 a.m. ET.

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