RTRS: Stocks drop as Obama speech and housing data weigh
Stocks fell on Wednesday as investors found little new in a major speech by President Barack Obama on how he planned to stabilize the economy, while gloomy home sales data weighed on the market.
Long-standing worries about recession and the fate of the banking sector persisted despite Obama's speech to Congress on Tuesday night, sending shares of financial services companies, big manufacturers and energy companies lower.
"The market was up 4 percent yesterday and I think that was probably a little excessive given the economic backdrop," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.
"There was a little bit of an overshoot to the upside yesterday and we're just giving some of that back early as President Obama didn't have anything substantive to say last night."
Data pointing to more weakness in the U.S. housing market added to the negative tone.
The pace of sales of existing home fell in January to a 4.49 million-unit annual rate while home prices and inventories dropped, the National Association of Realtors reported.
The Dow Jones industrial average .DJI fell 160.89 points, or 2.19 percent, to 7,190.05. The Standard & Poor's 500 Index .SPX declined 17.32 points, or 2.24 percent, to 755.82. The Nasdaq Composite Index .IXIC shed 28.29 points, or 1.96 percent, to 1,413.54.
The slide in stock prices marked a major setback after Tuesday's attempted rebound from 12-year lows.
Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) shares fell 6 percent to $4.44 following news that its Merrill Lynch & Co unit lost $15.84 billion in the fourth quarter, about $533 million more than previously estimated by Bank of America.
Shares of Citigroup (C.N: Quote, Profile, Research, Stock Buzz) fell more than 11 percent to $2.31 following reports that the bank may sell its Japanese investment bank and brokerage as the embattled U.S. lender looks to raise cash from a sale of global assets.
The Dow Jones home construction index .DJUSHB fell 4.4 percent as shares of luxury home builder Toll Brothers (TOL.N: Quote, Profile, Research, Stock Buzz) declined 4.3 percent to $16.31. Shares of Centex Corp (CTX.N: Quote, Profile, Research, Stock Buzz), the third-largest U.S. home builder, dropped 6.3 percent to $6.65.
On Nasdaq, shares of thin-film solar module maker First Solar (FSLR.O: Quote, Profile, Research, Stock Buzz) fell 19 percent to $111.02 after the company gave a bleak outlook.
Obama said the United States would emerge stronger from the crisis but investors found little in what he said to help the market sustain its attempted rebound on Tuesday from 1997 lows. [ID:nN24394594].
U.S. regulators are due to begin stress tests on Wednesday to determine how much capital banks need. Even so, investors remain uncertain about how the government would relieve banks of money-losing assets and revive lending.
Federal Reserve Chairman Ben Bernanke is back on Capitol Hill for a second day to testify on the economy, this time to the U.S. House Financial Services Committee.
