Stocks Finished Mixed; Banks, Utilities Up
Stocks finished little changed Wednesday in another tight trading day that featured sharp drops in commodities and government bonds.
The Dow industrials and the Nasdaq tech gauge squeaked out negligible gains while the Standard & Poor's 500 ended lower, a day after a sharp market rally pushed by results from bank stress tests.
Just two of the 10 Standard & Poor's 500 sectors finished positive, with financials and technology the only ones in green numbers.
Widely followed analyst Dick Bovesaid banks will surge 25 percent this year, but they struggled for gains despite a seal of approval from the Federal Reserve.
"For the first time in a long time people are starting to look at the fundamentals of the banking industry, which happen to be extraordinarily good," the vice president of equity research said in a CNBC interview.
The Fed delivered a surprise announcement Tuesday that all but four of the largest institutions — Citigroup being a notable exception — were well-positioned and had exceeded goals set forth in a stress test.
The big financial names were mostly higher, with JPMorgan Chase near the back of the pack while Bank of America and American Express easily leading gainers on the Dow industrials.
Disney, still smarting from its big-budget bomb "John Carter" and its poor weekend debut, was the biggest bluechip loser of the day, with ExxonMobil and Caterpillar also posting losses.
On the S&P 500, tech led the way, even though the sector went flat, while utilities, energy and telecom led sectors on the downside.
Technology has been the S&P's leader this year, and the tech-heavy Nasdaq the market's leading index.
"Many of the secular growth stories today are directly or indirectly related to tech, so in our view the sector is the best way to gain broad exposure to secular growth," strategists at Bank of America Merrill Lynch said in a note to clients. "Not only are valuations attractive across the cap spectrum, but balance sheets are flush with cash and companies have plenty of financial flexibility."
Shares at Goldman Sachs fell on the same day as a much-discussed op-ed piece ran in the New York Times from former executive Greg Smith. He said he is leaving the vaunted Wall Street giant because "the firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for."
Goldman CEO Lloyd Blankfein and President Gary Cohn issued a sharp rebuttal.
"Needless to say, we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients," they said in a joint memo.
The market also wrestled with the latest news out of the Federal Reserve, which held its zero-interest-rate policy in a decision released Tuesday that also included conflicting views on economic progress.
The upshot was that the market still has little direction on if and when the central bank will implement a third round of quantitative easing.
"Most officials have set conditions on future balance sheet expansion and for now the issue is moot because recovery is proceeding on track, risks of deflation have faded and easing measures are still paying dividends," said Citigroup economist Robert V. DiClemente.
In economic news, import prices rose a less-than-expected 0.4 percent in February as a drop in food prices offset a 1.8 percent surge in petroleum costs. The U.S. current account deficit, meanwhile, hit a three-year high of $124.1 billion.
Also, the Mortgage Bankers Association said demand for home loansposted a net decline of 2.4 percent, but actually rose 4.4 percent excluding a drop in refinancing requests.
Home builder stocks were volatile, with Beazer posting a gain while the rest of the group moved lower.
Across other markets, commodity prices were broadly negative as the dollar gained against the euro and surged against the yen.
Gold prices plunged below $1,650 an ounce while crude oil edged close to $106 a barrel.
Market jitters were reflected in the cost of downside protection, as the CBOE Volatility Index jumped 4 percent to offset, for the moment, a violent seven-month downturn that has seen the fear gauge plunge 58 percent. The VIX options contract settles today, possibly explaining some of the sharp movements this week.
In the credit markets, US debt yields continued their march higher. Despite a sale of 30-year bondsthat seemed to be uneventful, Treasurys added to price losses. The benchmark 10-year note dropped more than a full point in price to yield 2.24 percent, its highest level since late October. The 30-year bond fell more than 2 points to yield 3.38 percent.
Tuesday marked the first time the Dow finished above 13,000 and the Nasdaq above 3,000, on the same day. The Dow and S&P 500 have gained in five consecutive sessions, and all the major averages are sitting at fresh multi-year highs.
European shares finished mostly higher, led by financials .
Sources tell CNBC that computer game manufacturer Zynga is planning a secondary stock offering, with a filing possibly coming as early as Wednesday.