NEW YORK — Bearish analyst comments on banks, a slide in oil
prices, and glum signals about the U.S. jobs outlook weighed on the stock
market Wednesday.
As investors went on the defensive, gold rallied for a third
straight day. Futures on the metal climbed $12.90, or 1.1 percent, to a record
$1,212 per ounce, up 3.2 percent over the recent three-day streak.
The Dow Jones Industrial Average slipped 18.90 points, or
0.2 percent, to 10,452.68, snapping a two-day winning streak in which it had
added 162 points.
The blue-chip measure was hurt in part by a 1.5 percent
decline in component Bank of America after the Wall Street Journal reported
that two chief executive candidates said the company should consider breaking
itself up, though the board has rejected that idea.
Also weighing on banks, UBS analysts predicted that capital
markets’ seasonal slowing could come earlier this year. They cut their
fourth-quarter earnings target for Morgan Stanley, JPMorgan Chase, Bank of New
York Mellon and others. In addition, Sanford C. Bernstein analysts said
JPMorgan could face a revenue decline of as much as $3 billion under a
“worst case” scenario for derivatives legislation.
Some traders are also concerned about a possible renewed
wave of stock offerings by banks to bolster their balance sheets, appease
regulators, or generate cash to issue new loans. Though the Dubai debt crisis
has faded as a possible threat to U.S. firms recently, several other risks,
including weakness in the commercial real-estate sector, still linger for Wall
Street in 2010.
“I think there’s a dark cloud building over the
financials regarding possible capital raising,” said strategist Carmine
Grigoli, of Mizuho Securities. “That’s going to inhibit the upside
potential in these stocks for some time to come.”
Technology shares were a relative bright spot Wednesday,
helping the Nasdaq Composite Index to scratch out a 0.4 percent gain.
The S&P 500 was nearly flat in percentage terms, rising
0.38 point to 1,109.24, bolstered by a 1.3 percent gain in utilities but hurt
by 0.8 percent decline in the energy sector following the release of data
showing surprisingly robust U.S. reserves of oil.
The Federal Reserve said in its latest beige book of
economic indicators that conditions across many of the central bank’s 12 districts
“improved modestly” in late October and early November. But a weak
labor market and deteriorating commercial real-estate sector remain dark spots
in the U.S. recovery.
In another release closely watched by traders, Automatic
Data Processing and Macroeconomic Advisors reported that private-sector
employment fell by 169,000 jobs in November, more than the 150,000 jobs
economists forecast. The report comes a day before weekly jobless claims data
and two days ahead of the government’s data on monthly nonfarm payrolls.
Traders typically use the initial private-sector report as a barometer on the
government data to follow.
Don Bright, a partner at the proprietary firm Bright Trading
in Chicago, said that the stock market seems to have stalled lately, with the
S&P stuck around 1,100. But a significant surprise from Friday’s jobs
report, good or bad, could be the catalyst to jar the market into a new trading
range.
“Those numbers are just so important right now,”
Bright said. “No matter how much we talk about economic recovery, you have
to start getting people back to work before people really feel it.”
Analysts are expecting to see a decline of about 100,000
jobs on U.S. nonfarm payrolls in November when Friday’s report is released.
That would represent a slower pace of job losses than in October, when the
economy shed 190,000 jobs, according to the government’s last report.
Stock-market volume was light on Wednesday. Composite
trading in New York Stock Exchange-listed companies topped 1 billion shares,
extending a month-long trend of below-average activity. The full-day average in
2009 is about 5.7 billion shares.
There were 1,968 advancers and 1,040 decliners at NYSE.
Via McClatchy-Tribune News Service.
