US stocks ebbed yesterday as weak quarterly results from Bank of America Corp rekindled concerns about the toll the credit crisis has taken on banks and overshadowed rising energy shares as oil closed at a record high.
After the Dow closed out its strongest week in two months on Friday, blue chips retreated on news of a 77 percent tumble in first-quarter profit from Bank of America.
An index of financial stocks fell 1.7 percent, giving back gains made on Friday when Citigroup stoked optimism that the banking sector was taking steps to work its way through the credit crunch.
Making matters worse, National City Corp highlighted the sector's difficulties when the regional bank was forced to raise additional capital at the expense of its existing shareholders. Its shares sank 27.6 percent to US$6.03.
"People think the profitability prospects for banks are significantly damaged," said Stephen Massocca, co-chief executive at San Francisco-based investment bank Pacific Growth Equities. "I don't see nor do I anticipate that the bank capital raises are over."
Nasdaq managed to eke out a small gain, however, after Citigroup raised its earnings estimate on Apple Inc two days ahead of the iPod maker's quarterly earnings report. Apple's stock climbed 4.4 percent.
In addition to technology, energy was another pocket of strength after oil prices shot to their latest record high above US$117 a barrel on supply worries. Shares of oil services company Schlumberger rose 5 percent to US$106.91.
The Dow Jones industrial average fell 24.34 points, or 0.19 percent, to 12,825.02. The Standard & Poor's 500 Index slipped 2.16 points, or 0.16 percent, to 1,388.17. But the Nasdaq Composite Index rose 5.07 points, or 0.21 percent, to 2,408.04.
Both the Dow and the S&P 500 snapped a four-day winning streak.
TEXAS INSTRUMENTS SLIPS LATE
After the closing bell, shares of Texas Instruments Inc dipped 1.9 percent to US$30 as the maker of chips for everything from televisions to industrial products forecast second-quarter results that fell short of Wall Street's expectations. Texas Instruments closed on the New York Stock Exchange at US$30.59, up 3.3 percent.
During the regular session, Apple shares gained US$7.12 to US$168.16 on the Nasdaq.
"You've had some very positive reports and some very upbeat comments," from technology companies, and Apple could add to those, said Tim Smalls, head of US stock trading at brokerage firm Execution LLC in Greenwich, Connecticut.
On the New York Mercantile Exchange, May crude settled at a record US$117.48, up 79 cents, after hitting an intraday record high of US$117.76. Shares of Hess Corp rose 7 percent to US$112.56.
Bank of America Chief Executive Kenneth Lewis said credit market problems were not over and the effects of the housing slump may take at least the rest of 2008 to work out. Shares of the No. 2 US bank fell 2.5 percent to US$37.61.
Shares of National City, a large US Midwest regional bank, posted a quarterly loss and slashed its dividend. The bank also said it is raising US$7 billion by selling shares as it wrestled with the impact of the housing market downturn.
Investors worried that banks could be in for a prolonged period of dreary earnings as fallout from the housing slump and credit market turmoil takes its toll and concerns persist about the economy's health.
Shares of Citigroup Inc dipped 0.3 percent to US$25.03 on the New York Stock Exchange after Meredith Whitney, an influential bank analyst at Oppenheimer & Co, forecast a wider 2008 loss for the largest US bank.
On Friday, Citigroup reported a US$5.11 billion first-quarter loss. Yet its stock rose with the rest of the market, which rallied and gave the Dow its best week since February.
In other earnings news, Eli Lilly and Co posted lower-than-expected quarterly earnings, due to disappointing sales of its diabetes drug, Byetta. Its shares tumbled 4.8 percent to US$49.59 on the NYSE.
Shares of Sears Holdings Corp slumped 6.9 percent to US$97.48 on Nasdaq after the retailer announced late Friday it had been advised that its secured credit facility with Bank of America will end in July.
Trading was low on the NYSE, with about 1.12 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion. On Nasdaq, about 1.65 billion shares traded, below last year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of 9 to 7 and on the Nasdaq by 4 to 3.