Stocks drop with banks; Cisco cushions Nasdaq
NEW YORK (Reuters) - The Dow and S&P 500 fell on Tuesday as bank stocks slid on a broker warning about more losses at Citigroup and the Federal Reserve chairman said mortgage delinquencies and foreclosures were likely to rise.
But the Nasdaq ended little changed after Cisco Systems Inc's (CSCO.O) chief executive said he is more confident in the company's long-term growth, easing concerns about business spending.
The day got off to a rough start after Merrill Lynch & Co forecast a $15 billion loss at Citigroup Inc (C.N), sparking a 4.3 percent slide in its shares and pushing the S&P financial index down to a fourth straight day of losses.
"There's just uneasiness with the financials and the potential for the continuation of the credit problems," said Stephen Carl, principal and head of U.S. equity trading at the Williams Capital Group in New York.
The Dow Jones industrial average .DJI fell 45.10 points, or 0.37 percent, to 12,213.80. The Standard & Poor's 500 Index .SPX dropped 4.59 points, or 0.34 percent, to 1,326.75. But the Nasdaq Composite Index .IXIC inched up 1.68 points, or 0.07 percent, to 2,260.28.
CNBC television reported that a deal to rescue ailing bond insurer Ambac Financial Group (ABK.N) was near, pushing the company's shares up nearly 8 percent and helping the broader market cut losses during the session's last hour.
"The Ambac news started the recovery and Cisco comments pushed it further and then you got a bunch of short covering. You don't want to get caught short late in the day," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
At one time during the day, the S&P 500 index traded near its January 22 close of 1,310.
A TURNAROUND IN TECH
After spending most of the day in the red following a reduced profit margin forecast from Intel Corp (INTC.O), the Nasdaq edged higher as reassuring comments from networking equipment maker Cisco eased worries about tech spending.
Even so, concerns about the financial sector's outlook dominated, causing shares of Citigroup, the largest U.S. bank when ranked by assets, to finish down 4.3 percent at $22.10 on the New York Stock Exchange.
Shares of Bank of America Corp (BAC.N), the No. 2 U.S. bank by assets, fell 1 percent to close at $38.78, and shares of JPMorgan Chase & Co(JPM.N), the No. 3 U.S. bank, slid 1.6 percent to $39.19.
Other financial companies, including insurer American International Group Inc (AIG.N), fell 1.8 percent to $45.83. The S&P financial index .GSPF , down nearly 1 percent, capped its longest string of losses since December.
A pullback in oil prices and other commodities also curbed the broader market. U.S. crude oil for April delivery ended below $100 a barrel -- falling $2.93 to settle at $99.52.
But on the Nasdaq, shares of Apple Inc (AAPL.O) contributed the most to the index's slight uptick, finishing up 2.4 percent at $124.62. The company reiterated its 2008 sales target of 10 million iPhones, a goal that some analysts have questioned in the face of a weaker U.S. economy.
Cisco shares finished off 0.5 percent at $24.29 and Intel shares dipped 0.1 percent to $20. Earlier, Intel shares had fallen as low as $19.44.
An index of semiconductor stocks .SOXX gained 0.8 percent.
SHOE DROPS AT KENNETH COLE
After the bell, shares of footwear and clothing company Kenneth Cole Productions Inc (KCP.N) tumbled more than 14 percent to $13.15 after the company reported a fourth-quarter loss and slashed its dividend.
In a speech in Florida, Federal Reserve Chairman Ben Bernanke said more declines in house prices could be expected. The housing slump has had a damping effect on consumer confidence and spending, which is a strong element of economic growth.
Fed Vice Chairman Donald Kohn told a hearing of the Senate Banking Committee that U.S. banks should consider slashing dividends to ease the strain on balance sheets laden with bad debts.
Also hurting financials was Wachovia's reduction of its earnings estimates on four U.S. investment banks, including Bear Stearns Co Inc BSC.N, saying the first quarter for investment banks would be one of the worst in several years.
Volume was moderate on the New York Stock Exchange, where about 1.79 billion shares changed hands, below last year's estimated daily average of 1.9 billion. On the Nasdaq, about 2.70 billion shares traded, above last year's daily average of 2.17 billion.
The market's breadth was decidedly negative, with decliners outnumbering advancers by a ratio of about 2 to 1 on the NYSE and about 3 to 2 on the Nasdaq.
(Reporting by Ellis Mnyandu; Editing by Jan Paschal)
