Market awaits stress-test results

The Associated PressMay 6, 2009 

— Stocks held steady Tuesday, a day after a rally and ahead of results of the government's stress tests of banks.

Wall Street fell moderately following a jump the day before that sent the Standard & Poor's 500 index into positive territory for the year.

"Today's action, just drifting around, is not that surprising given Monday's rally," said Darin Newsom, a senior analyst at DTN in Omaha, Neb.

Traders had little reaction to comments from Federal Reserve Chief Ben Bernanke, who told Congress the economy should start growing again later this year. Bernanke did warn that even after a recovery begins, the economy will still show signs of weakness, but that caveat didn't surprise investors.

"I thought in general, the comments were optimistic, but I'm not sure they told us anything new," said Bill Stone, chief investment strategist at PNC Wealth Management.

A growing amount of upbeat economic data have driven stocks to their best two-month performance in nearly 35 years. Yet, a number of dark clouds still hang over Wall Street, including growing unemployment and mixed news from first-quarter corporate earnings reports.

This week, two major news events could easily upset the market's mood.

Results are due Thursday for the government's "stress tests" on banks, and on Friday the government will report monthly employment data, one of the economic indicators most closely watched by investors.

The Dow slipped 16.09, or 0.2 percent, to 8,410.65. The Standard & Poor's 500 fell 3.44, or 0.4 percent, to 903.80, leaving it essentially flat for the year. The Nasdaq lost 9.44, or 0.5 percent, to 1,754.12.

The Russell 2000 index of smaller companies fell 4.27, or 0.8 percent, to 502.55.

Among the economic data Tuesday, a private report on the service sector showed a seventh straight month of contraction. However, the pace of decline slowed more than expected -- further evidence that the economy's slide is moderating.

Investors showed little reaction.

"We're really not pushing the market that much lower," Newsom said. "There is still this general sense that things have improved a bit."

Traders are mindful that the stock market typically turns around, on average, about four months ahead of the economy. The S&P 500 is up 33.6 percent since the rally began March 10. The Dow is up 28.5 percent.

Investors are focused this week on the results of the stress tests, which will provide details on the U.S. financial companies in need of more capital. Reports have surfaced indicating that Citigroup, Bank of America and Wells, as well as a handful of regional banks, will be among those needing help.

On Tuesday, financial stocks were mixed. Bank of America rose 46 cents, or 4.4 percent, to $10.84, while Wells Fargo fell 98 cents, or 4 percent, to $23.27.

Overseas, Britain's FTSE 100 rose 2.2 percent, Germany's DAX index fell 1 percent and France's CAC-40 fell 0.4 percent. Markets in Japan were closed for a national holiday.

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