Stocks Erase Gains as Bank Fears Rattle Market

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 requirementsthen reboundedafter 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.

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

The Senate banking committee has tentatively scheduled a hearingon 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 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 shakyafter the last three days of last week," when U.S. stocks had their worst week since March, he said.

Travelers was the biggest gainer on the Dow after the insurance giant surprised to the upside with a profit of $2.36 a share.

DuPont also beat estimates, reporting that its profit jumped 10 percent.

Verizon and Johnson & Johnson also hit their earnings targets but were at the bottom of the Dow pack. Verizon took a hefty charge for layoffsand J&J provided a tepid full-year outlook.

Apple 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 Kindle a run for its money. (See a sneak peek of the tablet.)

Among other results from after the bell Monday: Texas Instruments topped forecasts, while biotech giant Amgenfell short.

Yahoo 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 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 projected its sales will rise 6 percentthis year.

Winterizing Your Portfolio - A CNBC Special Report
Winterizing Your Portfolio - A CNBC Special Report

In the pharmaceutical sector, shares of Dynavax Technologies 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.

Still to Come:

WEDNESDAY: Weekly mortgage apps; Geithner to testify; new-home sales; Five-year auction; Apple announcement; Fed statement; Earnings from Boeing, Caterpillar, ConocoPhillips and United Technologies; Obama State of the Union
THURSDAY: Jim Chanos speaks on China bubble; durable-goods orders; seven-year auction; Earnings from 3M, AT&T, Eli Lilly, Ford, Nokia, P&G, Altria, Colgate-Palmolive, Lockheed Martin, Motorola, Microsoft and Amazon
FRIDAY: First look at Q4 GDP; Chicago PMI; consumer sentiment; Earnings from Chevron

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