OK, everybody out of the pool.
Stocks snapped their winning streak Thursday as investors cashed in their bank chips.
After a three-day run that pushed the Dow Jones Industrial Average up 3.7 percent, stocks retreated, giving back nearly three-fourths of that gain, with the Dow shedding 2.7 percent. The S&P 500and Nasdaq took it much harder, losing more than 3 percent.
The profit-taking eclipsed some good news out of the Capitol: The House passed the stimulus bill, handing President Barack Obama the first major legislative victory of his tenure. And government officials have discussed pouring a further $1 trillion to $2 trillion to help backstop the banking system, the Wall Street Journal said, citing people familiar with the matter. And the Federal Reserve signaled it would keep interest rates near zero for quite “some time” and would continue to use unconventional tools to battle the fallout.
But investors were done with cheering the stimulus, having bought on the run-up. Today, it was sell on the news.
Banks tanked: Bank of America was the biggest drag on the Dow, falling 8.3 percent, followed by Citigroup and JPMorgan .
Wells Fargo shed 11 percent, giving back a third of its gain from the prior session after the bank backed its dividend and said it doesn't need any more bailout fundsto help it absorb Wachovia bank.
Allstate dropped 21 percent after the largest publicly-traded home and auto insurer reported a huge loss. S&P cut its credit rating on Allstate by one notch to "AA minus" amid worries about the company's capital adequacy.
That dragged down the rest of the insurance sector, with Prudential and Metlife falling 15 percent and 9.7 percent, respectively.
Oppenheimer analyst Meredith Whitney said she remains "cautious" on financial stocks and said the so-called "bad bank" strategy won't directly get credit flowing again.
Economic data released today were predictably grim: Initial jobless claims rose by 3,000 last week to 588,000, more than expected. Durable-goods orders skidded 2.6 percent last month, also more than expected. Excluding transportation, orders tumbled by 3.6 percent, which was far worse than the 2.8-percent slide expected. And new-home sales tumbled 14.7 percent to a 331,000 annual rate, the slowest pace on record and a far cry from the 400,000 rate expected.