Stocks finished at their session lows Wednesday as bank shares continued to struggle and retail sales unexpectedly fell for a second straight month.
A brief reprieve after the business-inventories report and comments from President Obama fizzled.
The Dow Jones Industrial Average fell 184.22, or 2.2 percent, to close at 8,284.89, as banks declined. The S&P 500 shed 2.7 percent, while the Nasdaq tumbled 3 percent.
This comes after the Dow gained 50 points Tuesdayas consumer and health-care stocks rose, though weakness in technology and banks prevented larger gains. Some analysts say these fits and starts are just the market cooling its heels after a runup of 30 percent since the market hit a 12-year low in early March.
Retail sales dropped 0.4 percentin April amid weak gasoline and electronics sales, the Commerce Department reported. That follows an upwardly revised 1.3-percent drop in March. Excluding the volatile auto component, retail sales fell 0.5 percent.
Economists had expected the headline number to be flat and the ex-auto gauge to be up 0.2 percent. It was a particular surprise, since chain stores last week reported better-than-expected April sales.
Macy's reported earnings today, saying its loss widened in its fiscal first quarter but still managed to beat expectations. Its shares fell 6.7 percent.
Business inventories declined 1 percent in March, compared with a 1.4-percent drop in February. Investors have been encouraged that companies have pared down so much, it may be time to start manufacturing again. But today, it wasn't enough to help dig the market out of its rut.
Mortgage applications declined last week even as lending rates continued to fall. The demand for refinancing fell even as new purchase applications rose slightly.
Shares of homebuilders decline, with Beazer Homes and Hovnanian down 22 percent and 12 percent, respectively.
American International Group Chief Executive Edward Liddy told a House panel that the company, which has gotten $180 billion from the government, will probably be able to pay back the money in three to five years— economy permitting.
On the speaking circuit, Treasury Secretary Timothy Geithner said at a banking conference a large part of the financial adjustments are behind us and that the government will use bailout repayments to help smaller community banks.
The Obama administration is contemplating a major overhaul of the compensation practices in the financial services industry, moving beyond banks to include loosely regulated hedge funds and private equity groups, the New York Times reported.
Some of the largest banks continued to struggle: HSBC, Bank of America and JPMorgan Chase all fell sharply. HSBC officials said Monday they felt the company could deliver a return on equity of 15 to 19 percent.
Goldman Sachs raised its rating on SunTrust Banks to "neutral" from "sell" after the stress test showed the bank needs less capital than the analysts had expected. Still, SunTrust stock lost 6.9 percent.
Home Depot shares ticked up 0.8 percent after Citigroup upgraded the stock to "buy" from "hold," saying the company could beat earnings expectations this year.
Over in tech land, Intel shed half a percent as the European Union Commission slapped the chip giant with a record $1.45 billion finefor anti-competitive practices. That overshadowed the company's positive statement on orders and billings, delivered after the bell Tuesday.
Rival Advanced Micro Devices rose 0.7 percent as the censure of Intel helped offset the company's quarterly loss and sharply lower sales.
>> Video: Was Intel Anticompetitive?
Investors continued to rotate into health-care stocks.
Merck and Pfizer were back at the top of the Dow pack, clocking in at Nos. 2 and 3, after an analyst said yesterday that Pfizer would likely increase its dividend after it completes the purchase of smaller rival Wyeth.
President Obama said Wednesday that the House is working to pass health-care reform by the end of July. After a meeting with House leaders, Obama said the money companies are spending on health care could be spent on innovation.
Shares of rival General Motors rebounded 5 percent, making it the top percentage gainer on the Dow, after a Dow Jones Newswires report that GM plans to import cars made in China. Currently, those vehicles are only sold in Asia. Earlier, the stock touched a fresh 70-year low just a few cents above $1. The stock had fallen as low as $1.09 in November.
Ford Motor said late Tuesday it raised $1.4 billion through its 300-million share offer for $4.75 a share, according to Reuters. The company's shares continued to struggle, though, ending down 1 percent.
Oil, which has been on a tear lately, ended down more than 1 percent at $58.02 a barrel.
The dollar rebounded, ending at 73.62 cents against the euro, after falling to a four-month low amid speculation that the U.S. might lose its triple-A credit rating.
The Treasury Department is due to make $21 billion in coupon payments on Friday as part of flows tied to its quarterly refunding moves. Another $52 billion of coupon securities are due to mature, for a total cash outflow of $73 billion, according to Reuters.
Trading was brisk, with about 1.77 billion shares changing hands on the New York Stock Exchange, well above the daily average. Decliners outpaced advancers, roughly 9 to 1.
Still to Come:
THURSDAY: PPI; weekly jobless claims; House hearing on the insurance industry; Earnings from Wal-Mart, Kohl's, Nordstrom
FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney, Abercrombie
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