Stocks ended lower as the hoopla about the government's plan to buy stakes in the nation's largest financial institutions died down and worries about earnings crept in.
The Dow Jones Industrial Average ended down 76.62, or 0.8 percent, to close at 9310.99. That final number belies the true behavior of the market today, with the Dow swinging in an 850-point range. The blue-chip index jumped more than 300 points at the opening bell, wobbled in a narrow range through midday, then dropped several hundred points about an hour before the closing bell before recovering much of its losses.
The S&P 500traded in-line with the Dow, ending down just 0.5 percent. TheNasdaq fell more than 3.5 percent amid concern about slowing tech demand.
Still, traders said the stomach-churning drops may be over.
"I think the death spiral has probably been taken off the table here and it’s time to begin to get invested again,” Michael Church, a portfolio manager at Church Capital Management, told CNBC.
One-third of the Dow 30 stocks ended higher, led by Citigroup , Bank of America and American Express .
Coca-Cola and Intel were the biggest drags on the Dow.
The rescue plans sent the Nikkei soaring 14 percent on Tuesday; Japan's market had been closed for a holiday on Monday, missing out on the global rally. European markets also extended Monday's rally, with stock markets finishing up around 2 or 3 percent.
The U.S. announced that it will inject $250 billion directly into banks, mirroring moves by other countries, to boost confidence in lending. The money will come from the $700 billion bailout plan announced a few weeks ago and nine banks will get the bulk of it.
Financials were the biggest gainers, with the S&P financial-sector index ending up 6.4 percent, buoyed by the government's cash infusion.
Citigroup gave the sector an extra boost, raising its ratings on 14 U.S. banks to "buy" from either "hold" or "sell."
Among the banks the government is taking a stake in are: Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, Goldman Sachs, Morgan Stanley and Bank of New York Mellon.
State Street and Merrill Lynch are also to receive a capital injection, other media reports said.
Treasury Secretary Henry Paulson said that "government owning a stake in any private U.S. company is objectionable to most Americans," but said the alternative "of leaving businesses and consumers without access to financing is totally unacceptable."
President Bush said, "The government's role will be limited and temporary."
Bernanke said that the rescue plan would restore normality to markets and lay the groundwork for economic recovery.
But some experts are skeptical, saying the sweeping measures will probably fail. The proposed $250 billion infusion into financials is merely a drop of water on a hot stove, Marc Faber, editor & publisher of the Gloom, Boom and Doom Report said, as it doesn't address the fundamental problem of deleveraging.
Of course, the market is a forward-looking animal, so, for better or worse, now that we have the details on the government's cash-infusion plan for banks, it's on to the next thing ... and that's the economy and earnings.
Investors are worried that the economic slowdown, coupled with all the government money flooding the market, is making the earnings outlook hazy. Many fear that we're going to have to dial down forecasts — and soon.
Economists now expect that S&P 500 earnings dropped 7.8 percent during the third quarter, according to Thomson Reuters, down from a prior estimate of minus-4.8 percent. It was a cruel, cruel summer: On April 1, the estimated growth rate for the quarter was 17.3 percent.
Investors punished tech stocks amid worries that the slowdown will crimp tech spending.
Shares of Intel dropped more than 4 percent ahead of its earnings, due out after the closing bell. Analysts expect earnings of 34 cents a shareon $10.26 billion in revenue.
ThinkPanmure analyst Vijay Rakesh slapped Intel shares with a "sell" rating on Friday, saying, "We believe Intel is heading into a perfect storm in 2009, with some of the prior growth drivers fading and multiple macro and company-specific headwinds."
JPMorgan's Christopher Danley put it more simply: Demand, he said, is going "straight down the tubes."
Apple shares lost 5.6 percent as the company announced its new line of laptops which includes, as expected, an under-$1,000 laptop. Well, just barely — $999. (Read the transcript of a live blog of the event.)
Rival Research In Motion also dropped 5.9 percent.
Among tech's biggest decliners were Amazon , Dell , Microsoft and Oracle .
On the earnings front, Dow component Johnson & Johnsonbeat market expectations on Tuesday, with earnings per share of $1.17 in the third quarter as its sales rose. Its shares rose 2.1 percent.
Beverage and snack maker Pepsicomissed its earnings target and slashed its full-year outlook as the economic slowdown has stirred the fizz out of soft-drink demand. Pepsi shares tumbled 12 percent.
Still to Come:
WEDNESDAY: Weekly mortgage applications; Empire State manufacturing survey; PPI; retail sales; business inventories; weekly crude inventories; Fed's beige book; Earnings from Abbott Labs, Coca-Cola, JPMorgan, Wells Fargo and eBay
THURSDAY: CPI; weekly jobless claims; industrial production; Philly Fed survey; weekly natural-gas inventories; Earnings from Bank of New York Mellon, BB&T, Citigroup, CIT Group, Continental, Harley-Davidson, Hershey, Merrill Lynch, Nokia, PNC Bank, Southwest Air, United Technologies, AMD, Capital One, Google and IBM
FRIDAY: Housing starts; consumer sentiment; Earnings from Gannett, Honeywell and Sony Ericsson
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