ESTORS were unable to recoup recent losses in the market yesterday, suggesting the struggles recently experienced by stocks are far from over.
A late-day selloff did not inspire confidence. Volume was light and early buying faded, as financials led the market downward. The S&P 500 is down nearly four per cent since 5 November after rallying nearly 13 per cent in September and October.
“I think the market is in a deterioration trend. It’s worrisome at this point, considering that we had a selloff yesterday with pretty big volume and poor advance-decline numbers,” said Frank Gretz, market analyst and technician at the Shields & Co brokerage in New York.
“The market is certainly vulnerable, and I think it is in fact headed for a correction.”
Financials sagged after the Federal Reserve said it will evaluate the ability of 19 large financial institutions to withstand losses in “adverse” economic scenarios.
The announcement accompanied guidance on potential dividend increases, first reported on 4 November. Banks rallied sharply that day and were still up one per cent in the past two weeks before Wednesday’s selloff.
The KBW bank index fell 1.4 per cent. Regional bank KeyCorp slid 3.8 per cent to $7.68 after Credit Suisse downgraded its shares.
Indexes also suffered from the continued uncertainty of Ireland’s financial crisis, which contributed to Wall Street’s drop of nearly two per cent on Tuesday.
The Dow Jones industrial average was off 15.62 points, or 0.14 per cent, to 11,007.88. The Standard & Poor’s 500 Index edged up 0.25 point, or 0.02 per cent, at 1,178.59. The Nasdaq Composite Index added 6.17 points, or 0.25 per cent, to 2,476.01.
Volume was light and some of the day’s quietness was due to investors awaiting the pricing of General Motors’ initial public offering after the market's close, said Nick Kalivas, senior equity index analyst at MF Global in Chicago.
The automaker set the terms for a landmark IPO that could be the largest in US history, raising up to $22.7bn. GM said after the closing bell the stock was priced at $33 a share.
“There’s a feeling a lot of money has been sucked out of the market to go pay for that. Once that gets out of the way, that theory’s going to be put to the test,” said Kalivas. Retailers kept a floor under the market as discount chain Target Corp rose 3.9 per cent to $55.62 after it forecast its best same-store sales in three years.