This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Stocks Deflate as Global Stimulus Hopes Ebb

NEW YORK (TheStreet) -- Major U.S. stock markets dropped Tuesday as investor hopes for an expansion of coordinated global stimulus measures ebbed after the Bank of Japan elected not to implement more government bond purchases.

Adding to the uncertainty was sustained ambiguity as to when the Federal Reserve might scale back its easing efforts, and the beginning of the German constitutional court's two-day hearing on whether the European Central Bank's bond-buying program is even legal.

Within this uncertain mix, the S&P 500 declined 1.02% to close at 1,626.13 while the Dow Jones Industrial Average lost 0.76% to 15,122.02. The Nasdaq fell 1.06% to 3,436.95.

"The commentary about Japan has pulled the market back a little bit -- I'm not sure I personally agree with that's why the market should pull back -- but, again, any good market that moves up, especially the way this has moved up, is going to retrench a little bit," said Robert Spina, portfolio manager of the Spina Group at Morgan Stanley Wealth Management.

Citigroup (C) declined after Portales Partners analyst Charles Peabody warned that the bank could lose up to $7 billion in regulatory capital this year if the dollar gains against the Japanese yen, the euro and currencies in emerging markets, which generate about half of the company's profits. Shares fell 3.8% to $49.95.

General Motors (GM) slipped 2.3% to $33.93. The automaker is slashing the price of its Chevy Volt electric car by $4,000 in hopes of increasing sales of the vehicle. The price tag for a 2013 Volt might end up coming in as low as $28,500 with the help of tax incentives and the discounted pricing.

Treasury yields were spiking amid the disappointment that the Bank of Japan wasn't doing more to ease its volatile bond market, but reversed course in the afternoon. The benchmark 10-year Treasury was lifting 11/32, diluting the yield to 2.178%. The Bank of Japan stood pat on its current monetary policy, saying it would continue to purchase assets that would expand Japan's monetary base at an annual pace of about 60 trillion yen ($612 billion) to 70 trillion yen in efforts to reach its 2% inflation target.

Prospects for a Fed stimulus pullback increased following upbeat numbers on Friday that showed an improvement in May's government non-farm payrolls report coupled with Standard & Poor's decision to raise its credit rating outlook on the United States.

"While certainly it matters that the Fed will slow down its bond purchases, we think that's really been too much of a focus on short-term thinking," said Kate Warne, investment strategist at Edward Jones. "Knowing that the Fed will eventually slow down its bond purchases is probably all most investors need to know."

Sprint (S) was a prominent advancer, up 2.4% to $7.35 after Japan's Softbank raised its offer for Sprint by $1.5 billion to $21.6 billion. Softbank also significantly increased the cash it will pay to Sprint's current investors.

SoftBank aims to buy Sprint for $7.65 a share by upping its stake in the No. 3 telecom provider to 78% and increasing the cash component of its proposed merger by $4.5 billion. The revised deal now also carries the backing of hedge fund Paulson & Co., Sprint's second largest shareholder.

Diamond Foods (DMND) popped 9.4% to $19.18 after reporting quarterly earnings of 5 cents a share, beating the average analyst estimate of a loss of 17 cents a share. However, the company did have to restate its prior quarter earnings to 37 cents a share versus the prior report of 43 cents a share because of a calculation error.

The Census Bureau reported Tuesday that wholesale inventories increased by 0.2% in April, as expected.

Written by Andrea Tse and Joe Deaux in New York

>To contact the writer of this article, click here: Andrea Tse.

Stock quotes in this article: ^DJI, ^GSPC, ^IXIC, S, GM, C, DMND 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs