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Stocks slipped Tuesday as investors parsed remarks from Fed Chairman Ben Bernanke and as the pending results for the government's bank stress test left the market a bit jittery.
The U.S. economy is on track for a recovery, Bernanke told a joint congressional economic committee, but it will be slow and unemployment will continue to rise as businesses remain cautious about hiring.
"We expect economic activity to bottom out, then to turn up later this year," Bernanke said in prepared remarks before the panel but cautioned that the recovery could be thwarted if the financial system deteriorates further.
In economic news, an ISM report showed the service sector contracted at a slower pace in April than in March.
“The services sector is beginning to show signs that the worst may be behind it," Joel Naroff of Naroff Economic Advisors wrote in a note to clients. "This report is likely to add to the growing belief that while the recession is lingering on, it may be getting a lot milder."
Meanwhile, the market is rife with speculation about the bank stress tests, due out Thursday. Reuters reported that ten of the 19 banks tested need fresh capital.
Bank stocks were mixed: Shares of both Citigroup [C
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] and Bank of America [BAC
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] gained, while JPMorgan [JPM
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] and Wells Fargo [WFC
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] declined.
UBS [UBS
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] shares fell after the Swiss bank confirmed a nearly $1.8 billion loss for the quarter and warned that it may need further writedowns in the quarters ahead.
Shares of AIG [AIG
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] shot up more than 10 percent on reports that the troubled insurer will report a first-quarter loss on Thursday but will not need additional capital.
Kraft Foods [KFT
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] led Dow gainers after the company, which makes Macaroni & Cheese, Oreo cookies and Maxwell House coffee, beat its earnings target by a nickel and backed its outlook, helped by cost-cutting measures.
CVS Caremark [CVS
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] narrowly beat expectations as drugstore sales rose more than 3 percent.
General Motors shares [GM
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] advanced following news that Germany may assist Italian automaker Fiat in the purchase of GM's German unit Opel.
Chrysler’s planned alliance with Fiat could be derailed by a group of investment funds seeking to block the deal.
This Week:
TUESDAY: Earnings from Disney, Electronic Arts and Pulte Homes after the bell
WEDNESDAY: Weekly mortgage applications; ADP employment report; Weekly crude inventories; Earnings from Cisco, News Corp., Prudential
THURSDAY: Chain-store sales; Stress-test results; BOE/ECB announcements; Weekly jobless claims; Fed's Bernanke speaks; Consumer credit; Earnings from Unilever, CBS, Nvidia
FRIDAY: Jobs report; wholesale trade; Earnings from Toyota, Berkshire Hathaway
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Data is a real-time snapshot *Data is delayed at least 15 minutes