A cautious forecast from FedEx Corp. and a ratings downgrade of 18 banks gave investors new reasons to worry about the economy. Stocks mostly fell Wednesday, though health and technology stocks posted gains after a widespread slide in stocks earlier in the week.
NEW YORK (AP) — A cautious forecast from FedEx Corp. and a ratings downgrade of 18 banks gave investors new reasons to worry about the economy.
Stocks mostly fell Wednesday, though health and technology stocks posted gains after a widespread slide in stocks earlier in the week.
FedEx issued a weak profit forecast and downbeat comments about the economy. Analysts look to shipping companies’ business as a gauge of the economy’s strength.
Financial stocks saw some of the biggest losses after Standard & Poor’s cut its ratings and revised outlooks on big banks. S&P cited concerns that the financial industry will remain volatile and that banks are expected to face tighter regulatory oversight.
In a bright spot, consumer prices rose less than forecast in May. Investors have been worrying that rising prices would threaten a recovery in the economy by curbing demand.
Trading is likely to remain choppy ahead of Friday’s quarterly “quadruple witching” day, which marks the simultaneous expiration of a number of different options contracts. Dan Deming, a trader with Strutland Equities in Chicago, said stocks are more likely to gain ground during such times.
The drop in stocks this week comes after stocks notched only modest gains last week. The selling has inserted a break into a three-month rally that had carried the S&P 500 index up 40 percent from 12-year lows. Many traders say expectations for an economic recovery had been too rosy.
Richard Hughes, co-president of Portfolio Management Consultants, said the market had gotten ahead of itself during the spring rally and that the economy remains weak. “People are taking a pause and it makes sense,” he said.
According to preliminary calculations, the Dow Jones industrial average fell 7.49, or 0.1 percent, to 8,497.18 after moving in and out of positive territory during the day. The broader S&P 500 index fell 1.26, or 0.1 percent, to 910.71, and the Nasdaq composite index rose 11.88, or 0.7 percent, to 1,808.06.
In corporate news, FedEx said its fiscal fourth-quarter loss widened because of hefty one-time charges and lower revenue, and the company warned it expects extremely difficult conditions in the next two quarters. Investors often look to the results of shipping companies like FedEx as a leading indicator of economic activity, and the poor outlook helped send shares lower in the early going. FedEx fell 72 cents to $50.70.
BB&T Corp. and Wells Fargo & Co. were among the biggest banks hit with lower ratings. BB&T fell 65 cents, or 2.9 percent, to $21.58, while Wells Fargo slid $1.31, or 5.4 percent, to $23.09.
The KBW Bank index, which tracks 24 of the nation’s largest banks, fell 3.3 percent.
The Labor Department said the consumer price index rose a seasonally adjusted 0.1 percent last month, less than a 0.3 percent rise that had been forecast. Excluding volatile food and energy costs, core prices rose 0.1 percent, as expected.
The market’s zigzags came as investors looked at the White House’s plan for remaking the rules that govern Wall Street. The changes would award new powers to the Federal Reserve to supervise large financial institutions considered too big to fail. It also would establish a consumer protection agency to govern lending and credit as well as rules that would reach into unregulated regions of the financial markets.
In other trading, bond prices mostly rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.60 percent from 3.65 percent late Tuesday.
Oil rose 56 cents to settle at $71.03 a barrel after a key government report said crude held in U.S. storage houses fell for the third straight week.
The dollar was mixed against other major currencies, while gold prices rose.
Stocks that fell outnumbered those that rose by 3 to 2 on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.2 billion Tuesday.
The Russell 2000 index of smaller companies rose 3.29, or 0.7 percent, to 507.03.
Major markets overseas mostly fell sharply. Britain’s FTSE 100 fell 1.2 percent, Germany’s DAX index lost 1.9 percent, and France’s CAC-40 fell 1.6 percent. Japan’s Nikkei stock average rose 0.9 percent.