Stocks pare losses from Microsoft, bank woes
NEW YORK -- Stocks seesawed in a wide range Thursday as investors shuttled between worries about the nation's banks and hopes that quick action on stimulus spending in Washington can help prop up the economy.
The major indexes fell but pulled well off their lows after tumbling on concerns about the stability of major banks and a worrisome profit report at Microsoft Corp. But the prospects of government spending brought out some bargain hunters.
The early drop and partial recovery extends the streak of stock market volatility to a third day. The Dow Jones industrial average, which had been down as much as 271 points, trimmed its losses to about 100 points.
Two House committees prepared the stimulus plan for a floor vote next week. There were still clear signs that it wasn't gaining as much Republican support as the new administration had been hoping for.
But the movement in Washington buoyed the market's mood.
"These are hope rallies," said Joe Saluzzi, co-head of equity trading at Themis Trading LLC. He said investors see the progress on the stimulus plan and are afraid of placing bets on stocks that are too pessimistic.
Even with the prospects of more government efforts to help prop up the economy, investors are still grappling with a long list of concerns. Microsoft surprised investors Thursday morning by reporting its fiscal second-quarter earnings early -- and the news was not good. The software giant posted an 11 percent drop in profit and said it will slash 5,000 jobs over the next 18 months.
Meanwhile, Bank of America Corp. said former Merrill Lynch & Co. Chief Executive John Thain has resigned after a meeting of Bank of America executives Thursday morning. The company didn't offer a reason for Thain's departure, but it follows news that Merrill Lynch had moved up its year-end bonuses, handing out payments just days before it was officially acquired by Bank of America on Jan. 1.
More downbeat economic readings, including an increase in the number of weekly jobless benefit claims and a sharp drop in home construction activity, added to the day's gloom.
In late afternoon trading, the Dow fell 182.63, or 2.22 percent, to 8,045.47.
Broader market indexes recovered some of their losses but still showed big drops. The Standard & Poor's 500 index fell 18.65, or 2.22 percent, to 821.59, while the technology-heavy Nasdaq composite index dropped 46.94, or 3.11 percent, to 1,460.13.
The Russell 2000 index of smaller companies fell 14.57, or 3.19 percent, to 442.19.
Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange where volume came to 1.04 billion shares.
Bond prices mostly fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.60 percent from 2.55 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.10 percent from late Wednesday.
The dollar rose against other major currencies, while gold prices rose.
Light, sweet crude rose 12 cents to settle at $43.67 a barrel on the New York Mercantile Exchange.
Thursday's news follows a wild two days in the markets. The Dow jumped 3.5 percent Wednesday amid a rally in the battered banking industry, stronger-than-expected results from IBM Corp. and hopes of swift action in Washington to help the economy. Those gains came just a day after the Dow tumbled 4 percent on worries governments would further intervene to help struggling banks.
"The increased volatility is not a good sign," said Bruce McCain, chief investment strategist at Key Private Bank. He said volatility should gradually decrease as the market progresses in the sometimes long process of finding a bottom. The market's fractiousness this week could indicate that it will take longer for Wall Street to find the level where stock prices are priced appropriately.
Still, McCain is encouraged that the benchmark S&P 500 index has remained above the intraday low of 741.02 it touched on Nov. 21 and the 11-year closing low it set on Nov. 20.
Roy Williams, chief executive of Prestige Wealth Management Group, said volatility is likely to endure. He contends the Dow industrials will remain in a range.
"I think we're going to be bouncing between 7,500 and 9,000 for the next couple of quarters," he said.
The biggest decliners among financial stocks Thursday included Bank of America, which tumbled 75 cents, or 11 percent, to $5.93, and Citigroup Inc., which dove 45 cents, or 12 percent, to $3.22.
Microsoft fell $1.89, or 10 percent, to $17.49.
Overseas, Britain's FTSE 100 slipped 0.19 percent, Germany's DAX index fell 0.98 percent, and France's CAC-40 fell 1.24 percent. Japan's Nikkei stock average rose 1.9 percent.