A late rally collapsed Wednesday as financials, some consumer names and energy stocks did an about-face in the final minutes of trading.
The Dow Jones Industrial Average lost 82.99, or 1 percent, to close at 7,886.57. The S&P 500 shed 0.8 percent. The tech-heavy Nasdaq, however, eked out a gain of 0.1 percent amid anticipation of solid results from Apple.
Stocks got off to a rocky start as investors digested the latest batch of earnings. This came after a rally Tuesdayas investors cheered comments from Treasury Secretary Tim Geithner that most banks are well capitalized.
Worries about banks and credit continued to nag at the market after results from Morgan Stanley and Capital One.
Morgan Stanley skidded 9 percent as the investment bank said credit troubles hampered earnings. The company's loss of 57 cents a share badly missed expectations of an 8-cent loss, and it cut its dividend to 5 cents a share.
Capital One shares fell 4.5 percent after the credit-card provider missed its earnings target, saying it's feeling the pressure of defaults.
Shares of rival American Express lost 0.7 percent.
Wells Fargo dropped 3.4 percent after the bank reported record earnings of $3.05 billion.
“The proof is in the pudding and that’s earnings … It’s pretty easy for these companies to look good because all the analysts are expecting the worst,” Jared Levy, senior derivatives strategist from Peak 6 Investments, told CNBC.
Continental shares skidded 9.3 percent after the airline posted its fifth straight quarterly loss but beat expectations.
Techs outperformed the broader market for most of the day but succumbed to the late selling.
Among the biggest gainers on the Nasdaq were Sandisk, which jumped 13 percent after the chip maker beat earnings expectations and was upgraded by several analysts, and Gilead Sciences , which rose 5.7 percent after the pharmaceutical company beat its earnings target helped by a rise in sales of its HIV drug, and
Apple shed 0.2 percent ahead of its results, after being up for most of the day. Analysts expect $1.09 a share on earnings of $7.95 billion.
>> Apple Knocks the Cover Off the Ball Again
AT&T gained 1.8 percent after the telecom reported earnings of 53 cents a share, beating Wall Street expectations by a nickel.
Yahoo shares rose 0.7 percent after the Internet portal met analysts' earnings target, helped by cost-cutting efforts, and said it would prune its global workforce by 5 percent.
Automakers turned mixed after an initial rally spurred by the Obama administration's plan to make $5 billion available to General Motors and another $500 million for privately held Chrysler to help the companies get back on their feet.
Shares of GM retreated following news that it it won't be able to make a June 1 debt paymentof $1 billion.
Ford gained 13 percent.
Caterpillar was the Dow's biggest percentage gainer, climbing 3.4 percent, after JPMorgan raised its rating on the stock to "overweight."
And Boeing advanced 1.8 percent after the aerospace giant beat earnings expectations. The company lowered its full-year outlook but that was still above analysts' expectations.
Altria rose 0.7 percent after the conglomerate hit analysts' target with earnings of 39 cents a share.
Volume was brisk, with 1.77 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, about 8 to 7.
Still to Come:
THURSDAY: Weekly jobless claims; existing-home sales; Earnings from Conoco-Phillips, GlaxoSmithKline, Pepsi, UPS, Fifth Third, Marriott, PNC Financial, SunTrust, Union Pacific, US Air, Microsoft, Amazon, AmEx and Burlington Northern
FRIDAY: G-7 meeting in Washington; durable-goods orders; new-home sales; Earnings from 3M,Honeywell, Schlumberger and Xerox
Send comments to firstname.lastname@example.org.