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Stocks Erase Gains as Bank Fears Rattle Market

Published: Tuesday, 26 Jan 2010 | 5:54 PM ET

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By: Cindy Perman
CNBC.com Staff Writer

Stocks erased their gains just in time for the closing bell Tuesday as news that the Senate has scheduled a hearing on President Obama's bank proposal for next week rattled the market.

Stocks had opened lower as China weighed on the market after tightening bank-lending requirements then rebounded after a report showed consumer confidence rose for a third straight month.

The Dow Jones Industrial Average shed 2.57, or less than a tenth of a percent, to close at 10,194.29. The S&P 500 lost 0.4 percent and the Nasdaq shed 0.3 percent.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

This erased much of Monday's gains and put stocks back on a losing track.

The Senate banking committee has tentatively scheduled a hearing on the president's proposed crackdown on banks for next week, featuring testimony from former Fed Chairman Paul Volcker. The committee is planning a separate hearing with Treasury officials on the matter.

Financials were the day's worst performers, with JPMorgan [JPM Loading... () ] the biggest decliner on the Dow.

Consumer confidence hit its highest level since September 2008, the Conference Board reported. Its measure of confidence ticked up to 55.9 from an upwardly revised 53.6 in December; economists had expected the gauge to rise to just 54.

That, coupled with a report a day earlier that the worst may be over for retailers, helped energize the market. U.S. retail sales should rise 2.5 percent this year, after a 2.5-percent drop in 2009, the National Retail Federation reported.

Some good earnings news also helped buoy the market, but gains were limited.

"Some of the earnings improvement is already baked in the cake," Art Cashin, director of floor operations at UBS, said on CNBC this morning. "Plus, the market's still a little stunned and shaky after the last three days of last week," when U.S. stocks had their worst week since March, he said.

Travelers [TRV Loading... () ] was the biggest gainer on the Dow after the insurance giant surprised to the upside with a profit of $2.36 a share.

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DuPont [DD Loading... () ] also beat estimates, reporting that its profit jumped 10 percent.

Verizon [VZ Loading... () ] and Johnson & Johnson [JNJ Loading... () ] also hit their earnings targets but were at the bottom of the Dow pack. Verizon took a hefty charge for layoffs and J&J provided a tepid full-year outlook.

Apple [AAPL Loading... () ] was among the biggest gainers on the Nasdaq 100. The company dazzled the crowd on Monday, beating estimates with both earnings and revenue amid strong Mac sales.

Investors are also looking to Apple's announcement on Wednesday, which is expected to be about a new tablet computer that could give Amazon's [AMZN Loading... () ] Kindle a run for its money. (See a sneak peek of the tablet.)

Among other results from after the bell Monday: Texas Instruments [TXN Loading... () ] topped forecasts, while biotech giant Amgen [AMGN Loading... () ] fell short.

Yahoo [YHOO Loading... () ] is the most prominent company on the schedule to release quarterly numbers after the closing bell.

Chips, one of Monday's biggest winners, largely shrugged off the IDC's projection that microprocessor sales will jump 15.1 percent this year. The Philadelphia Stock Exchange semiconductor index shed 0.2 percent.

Ford [F Loading... () ] was one of the top gainers in the Nasdaq 100 after the automaker formally announced plans to build the next version of its Explorer SUV at a Chicago plant, adding 1,200 jobs.

Toyota [TM Loading... () ] projected its sales will rise 6 percent this year.

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In the pharmaceutical sector, shares of Dynavax Technologies [DVAX Loading... () ] shot up after the company said an early-stage trial showed its experimental treatment for chronic hepatitis C was safe and induced antiviral activity.

Several homebuilder stocks were up more than 1 percent. The housing market appears to have bottomed, Freddie Mac CEO Charles Haldeman said Tuesday, which helped soften the blow of a report that showed home prices fell unexpectedly in November.

Meanwhile, the Federal Reserve's policy-making Open Market Committee kicked off a two-day meeting today, with its statement coming tomorrow afternoon at approximately 2:15 pm ET. Interest rates are unlikely to change, but investors are expecting to hear more details about removing the Fed's accommodative policies.

Plus, President Obama is expected to announce a three-year freeze on discretionary, "non-security" spending, which could happen during Wednesday's State of the Union speech. And the Treasury will auction $44 billion in 2-year notes today, with results available shortly after 1 pm New York time.