Stocks shaky over financial sector fears
NEW YORK » Wall Street ended a wobbly session with a mixed performance yesterday as concerns about the financial sector eroded enthusiasm over a decline in oil prices and a report that signaled modest growth in the service economy.
The worries about financial companies flared after Moody's Investors Service warned it might downgrade the ratings on bond insurers Ambac Assurance Corp. and MBIA Insurance Corp.
Some investors looking to sidestep the troubled financial sector moved into technology stocks, giving the Nasdaq composite index the biggest advance of the major indexes. The bifurcated trading follows two straight sessions of selling that left the Dow Jones industrial average down 235 points.
But the decline in oil at times appeared to help lift market sentiment. Light, sweet crude fell $2.01 to settle at $122.30 a barrel on the New York Mercantile Exchange after the Energy Department reported that demand for gasoline receded last week and that fuel inventories jumped more than expected. Still, retail gas prices advanced to a fresh record above $3.98 a gallon.
And the Institute for Supply Management's service sector index came to 51.7 percent for May; while any reading above 50 signals economic expansion, the figure is down from 52 in April. Still, the number did indicate that the economy, while behaving erratically, isn't in a steady downturn.
But the renewed concerns about the health of the financial sector kept some buyers at bay.
"Financials again are the lead story. The market is not going to recover until the financials do. They're not going to until all of these balance sheet items are taken care of," said Neil Massa, senior trader at MFC Global Investment Management in Boston.
The Dow Jones industrial average fell 12.37, or 0.10 percent, to 12,390.48.
Broader indexes were mixed. The Standard & Poor's 500 index fell 0.45, or 0.03 percent, to 1,377.20, while the Nasdaq rose 22.66, or 0.91 percent, to 2,503.14.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to 4.26 billion shares, compared with 4.23 billion shares yesterday.
The Russell 2000 index of smaller companies rose 4.71, or 0.64 percent, to 743.71.
Bond prices fell as stocks advanced. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.98 percent in late trading today from 3.89 percent in the previous session. The dollar was mixed against other major currencies, while gold prices fell.
The latest evidence of uneasiness about the financial sector came from Moody's announcement that it is reviewing the AAA insurance financial strength ratings for Ambac and MBIA. The rating agency said the "most likely" outcome of the review will be a downgrade. Ambac fell 51 cents, or 17 percent, to $2.49, while MBIA fell $1.06, or 16 percent, to $5.63.
J.M. Smucker Co. said it agreed to acquire the Folgers coffee brand from Procter & Gamble Co. in a nearly $3 billion stock deal. Smucker rose 12 cents to $53.87, while P&G advanced $1.04 to $66.45.