Banks Pull Dow to Lowest Close Since 2002

Banking stocks are getting hit again, as investors' skepticism over their solvency continues. Frank Curzio takes a look at the action in today's Real Story video.
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Updated from 4:07 p.m. EST

Stocks in New York trudged lower yet Thursday, with financials and tech weighing on the market, as investors absorbed a mixed set of economic data and earnings.

The

Dow Jones Industrial Average

fell 89.68 points, or 1.2%, to 7465.95, while the

S&P 500

gave up 9.48 points, or 1.2%, to 778.94. The

Nasdaq

was lowered by 25.15 points, or 1.7%, at 1442.82.

Banks again took a jab, with the KBW Banking index down 6.8% and

Bank of America

(BAC) - Get Report

and

Citigroup

(C) - Get Report

down 14% apiece, leading the decliners

on the Dow

.

Another sharp decliner,

Hewlett Packard

(HPQ) - Get Report

, fell 7.9% to $31.39 after reporting that

its first-quarter profit receded 13%

, and reining in sales and revenue estimates for the full year.

Investors had plenty of data to sort through, including numbers on the job market. The Department of Labor reported that initial jobless claims were unchanged for the week ended Feb. 14 at 627,000, a bit higher than expectations for 620,000.

The Producer Price Index, an indication of inflation at the wholesale level,

rose 0.8% in January

after falling 1.9% the month prior and outpaced expectations for a 0.3% increase. Core prices, which factor out food and energy costs, rose 0.4%, also exceeding a 0.2% uptick the month prior and expectations for 0.1%.

"These figures, of course, are inconsistent with the recent behavior of commodity prices and the large amount of anecdotal evidence indicating that businesses are cutting prices," writes Tony Crescenzi, chief bond strategist at Miller Tabak and

RealMoney.com

contributor. "The disparity reflects the lag that exists between changes in commodity prices and finished goods prices."

On Friday, the Bureau of Labor Statistics will release the consumer price index, a measure of the price of consumer goods and services purchased by households and a widely cited inflation indicator, with expectations for an 0.2% hike.

"The facts are that although commodity and real estate values continue to fall, the American consumer continues to pay higher retail prices on a year-over-year basis, and predictions are that those trends will continue," says Michael Pento, chief economist for Delta Global Advisors.

"In aggregate, (despite the plunge in oil prices) consumers have failed to experience much deflation outside of plunging home prices and some mild relief at the pump -- and indications are the latter may well be temporary," says Pento.

The Conference Board said the Leading Economic Index (LEI) increased for the second consecutive month in January, adding 0.4% in January, surpassing expectations for an 0.1% rise. However, the firm said it is too soon to say the contraction in the LEI, a six-month decline that began in July 2007, is coming to an end.

The primary sources of its recent strength have been the consistent and large contributions from inflation-adjusted money supply and the interest rate spread, with consumer expectations providing only a weak positive contribution.

On a dimmer note, the Philadelphia Fed manufacturing index, a preliminary report for the current month, registered at -41.3, the lowest reading since October 1990 and down significantly from-24.3 in January.

Employment losses were more substantial this month, and firms continued to report declines in input prices and prices for their own manufactured goods. The survey's new orders index declined 8 points, and the shipments index fell 16 points to its lowest level since the survey's inception. Unfilled orders and delivery times remained "significantly negative."

If there's a silver lining, it's that "most of the survey's indicators of future activity improved, continuing to suggest that the region's manufacturing executives expect declines to bottom out over the next six months," according to the report.

On Wednesday, President Obama fleshed out a plan to spend up to $275 billion, including up to $200 billion of added investments in mortgage giants

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

, to help the housing market.

The Homeowner Affordability and Stability plan, he said, aims to help currently ineligible Fannie Mae and Freddie Mac mortgage participants refinance at lower rates, create incentives so that lenders modify the terms of at-risk subprime loans, and takes "major steps" to keep rates low for new mortgages. But critics

kept the lid

on the enthusiasm.

Making headlines Thursday, federal authorities have filed a lawsuit against Swiss-based bank

UBS AG

(UBS) - Get Report

seeking information on as many as 52,000 U.S. customers who allegedly hid their accounts from the U.S. government in violation of tax laws. Nonetheless, shares were up 2.4% at $10.58.

Meanwhile, in earnings,

Sprint Nextel

(S) - Get Report

managed to post

a smaller-than-expected loss

in the fourth quarter, despite parting with 4.5 million customers in 2008. Shares rallied 20% to $3.25.

Chinese internet company

Baidu

(BIDU) - Get Report

said its fourth-quarter profit rose by nearly one-third, missing estimates by a mere penny. Its shares were also rising, and locked in a 3.5% gain to $132.57.

Also,

CVS Caremark

(CVS) - Get Report

shares moved up 6.4% to $28.71 after the company

topped revenue estimates

and said its fourth-quarter profit increased by 10 cents a share year over year to 65 cents.

Newmont Mining

(NEM) - Get Report

reported a profit

, earning $10 million, or 2 cents a share, in the fourth quarter, after a year-ago loss on a large writedown. But shares were off 4.6% at $40.79.

Away from stocks, the dollar was strengthening against the yen but was weaker against the pound and euro. Longer-dated Treasuries were falling. The 10-year note was recently down 13/32, yielding 2.8%, while the 30-year was giving up 1-02/32, yielding 3.6%.

In commodities, oil rose $4.86 to settle at $39.48 a barrel, and gold fell $1.70 to settle at $976.50 an ounce.

Stocks overseas were largely positive. In Europe, the FTSE in London and DAX in Frankfurt were modestly higher. In Asia, Japan's Nikkei gave up 1.5%, while Hong Kong's Hang Seng added 0.6%.