US stocks tumbled Tuesday, as investors braced for the results of the stress tests of the nation's banks and backpedalled after a two-month rally that boosted the S&P 500 by 36 percent. The Dow Jones industrial average lost 102 points to close at 8409.85, the S&P 500 index lost 12 points to close at 907.39 and the Nasdaq composite fell 43 points to close at 1716.24. After the close of trading, regulators said 10 of the 19 financial firms tested would need to raise a total of $75bn in additional capital in order to withstand a potentially bigger downturn in the economy. Bank of America will need to raise nearly $34b, the federal officials said. Wells Fargo needs $13.7bn, auto finance firm GMAC needs $11.5bn, Citigroup needs $5bn and Morgan Stanley needs $1.8bn. The other companies that need to raise money are regional lenders PNC Financial Services, Regions Financial, SunTrust , Fifth Third and KeyCorp. JPMorgan Chase, American Express, Goldman Sachs and Bank of New York Mellon won't need to raise money, as earlier reports had indicated. Other companies that don't need more cash are Capital One Financial, BB&T, US Bancorp, State Street and insurer MetLife. Also announced after the close: the chairman of the Federal Reserve Bank of New York has resigned effective immediately.
After the close Thursday, AIG reported a quarterly loss of 97 cents per share versus a loss of $1.41 a year ago. Analysts thought AIG would report a loss of 6 cents per share. Shares fell nearly 7% in extended-hours trading.
The government's April employment report is due Friday morning. Employers are expected to have cut 600,000 jobs from their payrolls after cutting 663,000 the previous month. The unemployment rate, generated by a separate survey, is expected to have risen to 8.9% from 8.5% in March. The number of Americans filing new claims for unemployment fell to 601,000 last week from a revised 635,000 the prior week, the Labor Department reported. The figure marked a 3-month low. Economists expected 635,000 claims. Continuing claims rose to 6.35 million, the 14th straight record high.
Another government report showed first-quarter productivity rose 0.8% after falling 0.6% in the previous month. Economists thought it would rise 0.6%. Unit labor costs rose 3.3% in the first quarter after rising 5.7% in the previous quarter. Economists thought costs would rise 2.7%. Consumer credit plunged $11.1bn in March after rising $8.1bn in the previous month. Economists expected it to fall $4bn.
Speaking Thursday morning, Federal Reserve Chairman Ben Bernanke talked about ways to improve oversight of the banking system so as to avoid future crises. He said a "holistic approach" was necessary and that regulators have to track individual banks and the system as a whole to manage risk.
Wal-Mart Stores posted better-than-expected sales in April, but the overall retail picture remained mixed as consumer spending was tepid in a recessionary period. Wal-Mart said same-store sales rose 5% in April, versus forecasts for a rise of 2.8%. Same-store sales is a retail metric referring to sales at stores open a year or more.
Children's Place reported a 5% rise versus forecasts for no change. Shares rose 10.6%.
Teen clothing retailer Hot Topic reported sales rose 3.1% versus a forecast for a rise of 7%. Shares plunged 19.6%.
General Motors struggling to stay afloat, said it lost $6bn, or $9.66 per share, in the first quarter. However, analysts were expecting an even bigger loss.
Cisco Systems reported quarterly sales and earnings that fell from a year ago but still topped estimates. The company also said it sees signs of a turnaround. AT&T and Verizon Communications both slipped after JPMorgan Chase downgraded them.
Chipmakers led the tech decliners, with Intel, Advanced Micro Devices and Broadcom all slumping.
Treasury prices fell, raising the yield on the benchmark 10-year note to 3.32% from 3.14% Wednesday.
Treasury prices and yields move in opposite directions.
In currency trading, the dollar fell versus the euro and gained against the yen.
U.S. light crude oil for June delivery rose 36 cents to settle at $56.71 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $4.50 to settle at $915.50 an ounce.
The Nikkei average rose 0.5 percent to a six-month closing high today, as bank stocks such as Mitsubishi UFJ Financial Group surged after stress tests eased uncertainty over the health of U.S. lenders. Banks rallied for a second straight day with shares in big lenders hitting multi-month highs, after the U.S. government's assessment of bank health reassured investors about the stability of the financial system. The Nikkei rose 47.13 points to 9,432.83, its highest finish since November 5 and taking its gain for the week to 5.1 percent -- the biggest gain since March.
UK stocks closed flat on Thursday with weakness in stocks of Vodafone, extinguished early gains from optimism on the outcome of U.S. bank "stress tests" on banks. Stocks were sharply higher after the Bank of England kept rates on hold and expanded quantitative easing but retreated in volatile afternoon trade, tracking weakness in U.S. stocks following downgrades in the telecom sector. The blue-chip index ended 2.19 points higher at 4,398.68 after touching a high of 4,520.82 for the session.
The BoE increased its quantitative easing programme by £50bn-£125bn and the ECB cut interest rates by 25 basis points to 1.0 percent as expected. Sterling fell broadly, retreating from a four-month high against the dollar following the move from the BoE. Banks were stronger in early trade after U.S. Treasury Secretary Timothy Geithner said none of the 19 banks being examined under stress tests is at risk of insolvency. Barclays fell 4.3 percent, retreating from gains early on after it said its first-quarter profit rose 15 percent from a year ago. Lloyds Banking Group sank 14.3 percent after company said impairment charges were rising significantly as it reiterated it would report a loss before tax for 2009. Royal Bank of Scotland slid 9 percent but the more internationally focused HSBC rose 3 percent and Standard Chartered added 0.2 percent. Vodafone was the biggest drag on the index, down 4.9 percent after JP Morgan downgraded shares in the big U.S. mobile firms AT&T and Verizon to "neutral" from "overweight" on "secular challenges within the wireline and wireless segments". Elsewhere in the financial sector, Old Mutual added 4.3 percent after the company said its pro-forma Financial Groups Directive surplus stood at £0.9bn at the end of March, up from £0.7bn at the end of December.
Other insurers were also buoyed by French peer Axa whose first quarter results came in better than feared. Legal & General added 9.9 percent, while Prudential and Aviva strengthened 3.7 percent and 0.7 percent respectively.
Heavyweight energy stocks were the largest boost to the index, bolstered by crude prices briefly rising above $58 per barrel CLc1. BP, Royal Dutch Shell and BG Group, added 0.2 percent to 2 percent.
Unilever surged 9.9 percent after the company reported a 4.8 percent rise in first-quarter underlying sales and said it planned to step up innovation and brand support from the second quarter.