By Kate Gibson
NEW YORK (MarketWatch) -- U.S. stocks retreated Thursday, though
losses were pared significantly by the close, as weekly jobless
claims disappointed and investors fretted about the methods used by
banks foreclosing on mortgages.
"Banks have been underperforming this whole rally, and for such
an important sector to be weighed down by these issues has
implications for bank lending and the growth of the economy," said
Peter Boockvar, equity strategist at Miller Tabak.
"The foreclosure paper issues, that will get resolved, but for
the major ones that did most of the originating, it's potentially
open-ended, and having to buy back a lot of disputed mortgages is a
growing concern," said Boockvar.
After a four-session run-up, the Dow Jones Industrial Average
(DJI) fell more than 70 points during the session but a late
comeback allowed it to finish down by only 1.51 points at
11,094.57.
Bank of America Corp. (BAC) weighed most on the blue-chip index,
off 5.2%, followed by J.P. Morgan Chase & Co. (JPM), down
2.8%.
Both of the large banks have halted home foreclosures as they
review their practices. .
Among the Dow's minority risers, shares of Verizon
Communications Inc. (VZ) were up 0.7% after the telecom and Apple
Inc. (AAPL) said Verizon Wireless, a joint venture of Verizon and
Britain's Vodafone Group PLC (VOD) , would begin selling Apple's
iPad at the end of the month.
The S&P 500 Index (SPX) dropped 4.29 points, or 0.4%, to
1,173.81, with telecom up the most and financials hit the
hardest.
Since falling to its yearly low in early July, the S&P 500
dropped 0.4% at Wednesday close, with financials the worst
performer of the index's 10 industry sectors during that time.
Wednesday's earnings release from J.P. Morgan explains why,
wrote Michael Farr of Farr, Miller & Washington.
"J.P. Morgan is not immune to the larger issues affecting the
entire banking industry. The problem, in a nutshell, is a lack of
revenue growth. Investors are simply no longer willing to give
banks credit for lower credit costs and nothing else," Farr
wrote.
Notable movers included Apollo Group Inc.(APOL), shares of which
fell 23% after the operator of the University of Phoenix rescinded
its outlook for fiscal 2011, pointing to scrutiny from regulators
and a possible 40% drop in new students.
Other for-profit eductors were also hit, with shares of most
suffering double-digit declines. .
Posting its first lower finish in six sessions, the Nasdaq
Composite Index (RIXF) shed 5.85 points, or 0.2%, to 2,435.38.
Yahoo Inc. (YHOO) shares surged 4.5% after published reports
said the Internet-search company could be an acquisition target of
private-equity firms.
Rival Google Inc. (GOOG) is scheduled to release its earnings
report after the closing bell. .
For every two stocks advancing, three fell on the New York Stock
Exchange, where 1.1 billion shares traded.
Stock indexes retreated after the government said its count of
Americans filing initial applications for unemployment benefits
climbed last week. .
"The economy should be able to support current fourth-quarter
and early 2011 analysts' earnings estimates. However, the economy
still does not appear strong enough to add a meaningful number of
jobs," wrote Fred Dickson, chief market strategist at Davidson
Cos.
The increase in jobless claims helped push the dollar index
(DXY) , a measure of the U.S. currency against those of six other
nations, to its lowest level this year.
Dollar weakness helps drive the purchase of hard commodities,
including gold and equities, "especially those offering a dividend
yield above current interest rates," noted Davidson's Dickson.
Separately, the producer price index -- a gauge of how much
goods cost at the wholesale level -- climbed 0.1% last month,
excluding food and energy. .
Post-recession pressures stemming from excess capacity have kept
a lid on most consumer prices, but the scenario might not continue,
especially if the dollar continues to slide, said Dickson.