Stocks continued to slide Tuesday as a two-day Fed policy meeting kicked off in Washington and investors awaited results from today's Treasury auction.
The Dow Jones Industrial Average was down more than 100 points, or 1.1 percent, by midday. The Nasdaq and S&P 500 were also down more than 1 percent.
This came after stocks shed 0.3 percenton Monday amid profit-taking after a four-week rally that sent the Dow up 15 percent. Investors are taking a wait-and-see approach this week, which brings the Fed meeting, a $75 billion round of Treasury auctions and reports on retail sales, retail earnings and consumer prices.
In the morning's economic news, productivity rose 6.4 percentin the second quarter, the best reading in six years, and small business confidence slipped last month.
"We're still not sure that things are going to get better," said William Dunkelberg, the chief economist at the National Federation of Independent Business, which issued the report.
The NFIB said its small business confidence index fell in Julyfor the second straight month, dropping 1.3 points to 86.5. Dunkelberg said the number is consistent with negative growth in gross domestic product, depsite the predictions of many economists who see GDP turning positive this year.
The Fed starts its two-day meeting today and will deliver its statement tomorrow afternoon. Investors will be watching the statement closely for signs of an exit strategy for the extraordinary measures implemented to deal with the financial crisis.
Bank stocks skidded after Rochdale Securities analyst Dick Bove recommended taking short-term profits in the sector, saying bank stocks were running on "fumes"and not reality in their recent run-up. He said bank earnings won't improve in the third or even the fourth quarter. Still, he says the sector is attractive long-term.
Citigroup was down more than 8 percent, while Bank of America and JPMorgan also fell sharply.
Piling on to the pressure on the banking sector, Miller Tabak cut its price targets on Zions Bancorp and Regions Financial .
CIT Group shares tumbled after the company said it would file for bankruptcy protection if it failed to complete its debt tender or arrange other financing.
Shares of Freddie Mac , the battered government sponsored mortgage agency, skidded, a day after the company reported its first quarterly profit in two years. Shares of its sister agency, Fannie Mae , jumped.
The market was buzzing about an op-ed in the Wall Street Journal today about Ginnie Mae, the Government National Mortgage Association, and the fact that much of its lending is esssentially subprime.
Plus, investors will be watching the latest round of Treasury auctions, which kicks off today with $37 billion in 3-year notes today; results coming shortly after 1 pm New York time. That will be followed by $23 billion in 10-year notes Wednesday and $15 billion in 30-year bonds Thursday.
More moving-and-shaking news out of the auto sector: General Motors executives said the all-electric Chevrolet Volt — expected to hit showrooms late in 2010 — will get 230 miles per gallon.
President Obama will take his pitch for health care reform on the road again today, this time hosting a town hall in New Hampshire that begins at 1:30 pm New York time.
No earnings reports of note are scheduled before the bell, but Applied Materials , the largest maker of semiconductor manufacturing equipment, will report in the late afternoon.
- Peter Schacknow contributed to this report.
TUESDAY: Two-day Fed meeting begins; wholesale trade; Treasury 3-year auction; Earnings from Applied Materials
WEDNESDAY: Weekly mortgage applications; international trade; weekly crude inventories; Treasury 10-year auction; Fed announcement; Earnings from Macy's
THURSDAY: Retail sales; weekly jobless claims; import/export prices; business inventories; Treasury 30-year auction; Earnings from Wal-Mart, Kohl's and Nordstrom
FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney
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