Down Day for U.S. Stocks

The major indices couldn't hold on to early gains and finished the session in negative territory. Frank Curzio discusses the day in The Real Story (video above).
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Updated from 4:17 p.m. EST

Stocks in New York closed lower Wednesday after disappointing earnings by such companies as

Kraft

(KFT)

and

Walt Disney

(DIS) - Get Report

, while more bank talk shared the spotlight with better-than-expected economic data.

The

Dow Jones Industrial Average

finished the day down 121.7 points, or 1.5%, at 7956.66, while the

S&P 500

was off by 6.28 points or 0.8%, at 832.23. The

Nasdaq

lost 1.25 points, or 0.08%, at 1515.05.

Financials, lately at the forefront of any market movement, were running amok, with the KBW Bank index shedding 1.5% after a mid-afternoon fling in positive territory.

Bank of America

(BAC) - Get Report

took the worst hit, losing 11.3%.

Goldman Sachs

(GS) - Get Report

and

Morgan Stanley

(MS) - Get Report

, however, tacked on 6.2% and 5.1%.

Ultimately, the market is waiting to see what will come out of Washington, said Jeff Saut, chief investment strategist at Raymond James Financial, referring to anticipated word on the stimulus package and the next chapter in the bank relief effort. The stimulus will continue to be the "carrot in front of the horse" until more details emerge, likely this weekend or early next week, he said.

In the meantime, earnings releases continue to give a bleak picture of the economy.

Time Warner

(TWX)

and Disney disappointed late Tuesday, with the former reporting

a fourth-quarter loss of $16 billion

on massive writedowns in its cable, publishing and AOL assets, and the latter citing declining DVD, television and theme park income as reasons for a 32% decline in profits.

Time Warner tracked down 3.7%, and Disney skated down 7.9% in the session.

Leading the losses on the Dow, Kraft declined 9.2%, or $26.11, after reporting that

its fourth-quarter profit fell 72%

on costs related to a restructuring program.

Costco Wholesale

(COST) - Get Report

traded down 6.8% after it said it expects second-quarter earnings to be "substantially below" analyst forecasts in light of the weaker economy.

In a case of "more of the same,"

Panasonic

(PC)

, down nearly 1%, said it expects to record its first yearly net loss in six years in March and will cut 15,000 jobs globally to adjust to the economic downturn. Those numbers add to a slew of layoff announcements earlier in the week.

Helping to put the number of layoffs in perspective, on Wednesday morning, ADP Employer Services said private employers eliminated 522,000 jobs in January vs. 659,000 jobs lost in December. Economists - who will use this data as a preface for the jobs report later this week -- had expected a median 530,000 private sector job cuts in January, according to a

Reuters

poll.

Keep in mind that expectations have hiked considerably since last summer, wrote Tony Crescenzi, chief bond analyst at Miller Tabak, on his RealMoney.com blog. "This stark change clearly shows that the preparedness for monthly job losses is unusually high."

Also, notably, last month, ADP Employment Service far overshot the subsequent report by the labor department, after substantially underestimating job loss figures in November.

Some of today's economic news offered a glimmer of hope, as the U.S. service sector shrank less severely than expected in January, with the Institute for Supply Management's nonmanufacturing index registered at 42.9 in January up from 40.1 in December, and compared to expectations for 39.

"That shows that nonmanufacturing activity is slowing, but at a decelerated pace in January, and that's a good thing in the sense that if we are slowing-but-decelerating, we may be again seeing a sign of a bottom along the way," says Walter Gerasimowicz, chairman and CEO of Meditron Asset Management.

Also Wednesday, the Mortgage Bankers Association's Market Composite Index, a measure of mortgage loan application volume, increased 8.6% on a seasonally adjusted basis to 795.4, for the week ended Jan. 30 from the week prior.

And lastly, the

ABC News

and

Washington Post

weekly Consumer Confidence Index lessened to negative 52 from negative 54 a week prior, a twice-reached record low.

Trying to rebuild confidence in the financial system, Treasury Secretary Tim Geithner and President Obama held a press conference to announce

a limit on executive pay , to $500,000 a year, for those executives employed by government-assisted financial institutions. The government has been cracking down on exuberant salaries and bonuses as well as spending in institutions that are taking taxpayer aid.

Taking its own steps to garner confidence, and perhaps in response to public reaction,

Wells Fargo

(WFC) - Get Report

abruptly canceled

a pricey Las Vegas casino junket

for employees after it received criticism that it was misusing $25 billion in taxpayer bailout money. Nonetheless, shares retreated 4% to $17.45 on Wednesday.

Taking a look at commodities, crude oil fell 52 cents to settle at $40.26 on Wednesday. Gold gained $9.70 to settle at $902.20.

Longer-dated Treasuries were recently mixed; the 10-year note was giving up 4/32 to yield 2.9%, the 30-year was rising 12/32, yielding 3.7%.

The dollar was recently stronger against the euro and yen, and weaker against the pound.

Taking a look overseas, in Europe, the FTSE in London and the DAX in Frankfurt cleared the day in positive territory. In Asia, Japan's Nikkei and Hong Kong's Hang Seng also registered gains in their session.