Stocks Retreat as Investors Get Defensive

Stocks turned lower Wednesday as investors got defensive ahead of earnings season, rotating into pharmaceuticals and out of techs.

NYSE Euronext said it was informed by authorities that nyse.com was hacked but added that it "has not and could not impact" trading.

Stocks hit their lowest level in 10 weeks on Tuesday amid growing doubts about the economic recovery and jitters about earnings. Validating investor fears about the economy, an Obama economic adviser suggested that a second round of stimulus may be needed.

On Wednesday, a White House budget official said the Obama administration is NOT discussing a second stimulus.

"No one in the administration is talking about a second stimulus at this point," Robert Nabors, of the Office of Management and Budget, said at a House hearing on the $787 billion stimulus plan. "What we are focused on right now is implementing the recovery act that Congress has already passed," he said.

Financials were among the hardest hit today, with Bank of America the top percentage decliner on the Dow.

Stocks had opened higher Wednesday amid some select buying, including Alcoa, which led the Dow in morning trading.

But by late morning, Alcoa retreated ahead of earnings from the aluminum giant after the closing bell. Analysts expect a third straight loss.

Alcoa is the first Dow component to report and marks the unofficial start to earnings season. Analysts expect the season to be another downer, projecting a 36-percent decline in S&P 500 earnings for the second quarter, which would be the eight straight quarter of declines. Commodities stocks are expected to lead the decline given the sharp dropoff since last year's peak.

Oil stocks including ExxonMobil and Chevron skidded as crude fell below $62 a barrel.

Crude continued to slide even after a report showed crude supplies shrunk by 2.9 million barrels last week, as traders continued to worry about proposals from both sides of the Atlantic to crack down on specualtion in oil markets.

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Reflecting these hard economic times: Family Dollar reported its profit jumped 36 percent, beating expectations, as cost-conscious consumers headed to the dollar store for bargains on staples.

One economic beacon came out of the housing sector: Mortgage applications rose 11 percent last week as mortgage rates again receded.

The 30-year fixed was at 5.32 percent overnight, according to Bankrate.com.

Google rose after the search giant announced late Tuesday plans for a PC operating system  based on its Chrome Web browser that will challenge Microsoft 's Windows operating system.

Overall, however, techs were lower as investors worried that the stalled recovery would crimp tech spending, and instead moved back into defensive stocks like pharmaceuticals.

Amgen shot up more than 15 percent after an osteoporosis drug met trial goals.

Johnson & Johnson and Merck were the two biggest percentage gainers on the Dow.

And insurers got a boost amid buzz about a potential compromise in the Obama administration's push for a public health-insurance alternative that investors see as less harmful to private insurers and hospital operators.

This morning, the administration announced a deal with three hospital groups that is expected to save $155 billion in health-care spending over the next decade, mainly by lowering charges for health services to the poor and elderly.

Pharma analyst Leerink Swan said movements in the sector would remain difficult to predict as health-care reform is in progress and the economy remains in flux.

Still to come: Results from a 10-year Treasury auction are due out at 1 pm ET today following a successful 3-year Treasury auction on Tuesday. Plus, consumer credit is due at 3 pm.

— Peter Schacknow contributed to this article.

Still to Come:

WEDNESDAY: Consumer credit; Earnings from Alcoa after the bell
THURSDAY: Chain-store sales; weekly jobless claims; wholesale trade; Fed's Duke speaks; Earnings from 3Com
FRIDAY: Import/export prices; international trade; consumer sentiment

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