Stocks slip as investors take profits

NEW YORK - Investors heard some more good news about the economy Thursday but locked in profits anyway following huge gains earlier in the week.

Upbeat reports on the job market and retail sales initially sent stocks higher but the gains eroded by mid-morning as traders asked “What’s next?” and trimmed their holdings following the 4.8 percent gain so far this week in the Standard & Poor’s 500 index.

“This is a market that is starting to bake in a lot of positive surprises,” said Craig Peckham, a market strategist at Jefferies & Co.

The selling comes ahead of the formal release of results from the government’s “stress tests” of bank balance sheets after the closing bell. News reports have already given investors a decent idea of what to expect so analysts aren’t predicting big surprises.

A massive two-month rally has left the S&P 500 index in the black for the year and up more than 30 percent from 12-year lows reached in early March. Analysts said it wasn’t surprising that the market would take a break after such big gains.

Technology shares posted the biggest losses Thursday after security software maker Symantec Corp. posted weaker-than-expected results. Retailers were mixed even after many of them, including Wal-Mart Stores Inc., reported better-than-expected April sales.

“The fact that we’re seeing the retailers sell off on these positive surprises suggests the bar has been raised on what companies need to do to take stocks higher,” Peckham said.

In early afternoon trading, the Dow Jones industrial average fell 82.20, or 1 percent, to 8,430.08 a day after the blue chips jumped 102 points to close above the 8,500 level for the first time in four months. The index is down only 3 percent for the year.

The Standard & Poor’s 500 index fell 8.37, or 0.9 percent, to 911.16, and the Nasdaq composite index fell 34.55, or 2 percent, to 1,724.55.

Federal Reserve Chairman Ben Bernanke, addressing a Fed conference, said a broader approach is needed for strengthening oversight of the banking system and said information gleaned from big bank “stress tests” should pave the way for improvements on that front.

In economic news, new applications for unemployment benefits fell last week to the lowest level in 14 weeks. The Labor Department’s tally of new jobless claims fell to 601,000 from 631,000 the previous week, well below the 635,000 economists had been expecting. A four-week moving average of initial jobless claims that smooths out fluctuations fell from a high in early April.

The employment reading follows a better-than-expected private snapshot of the labor market on Wednesday and comes a day ahead of the government’s April employment report. It is often regarded as the most important economic news each month because a drop in unemployment could bolster everything from banks to retailers if consumers can continue to make mortgage payments and go shopping.

There were also reports showing that productivity rebounded slightly in the first quarter while wage pressures eased.

Wal-Mart said sales of Easter merchandise and more shoppers in its stores helped its sales jump 5 percent, much more than the 2.9 percent rise analysts had forecast. Wal-Mart rose 89 cents to $50.40.

The well-being of retailers is key to the economy because consumer spending accounts for more than two-thirds of economic activity.

Symantec reported a loss for its fiscal 2009 fourth quarter, hurt by a hefty goodwill impairment charge and lower-than-expected revenue. The stock fell $2.59, or 14.7 percent, to $15.

Financial stocks were mixed ahead of the government report cards on banks. The tests, designed to determine which banks would need a stronger capital base if the economy weakens, are at the crux of the Obama administration’s plan to fortify the financial system. The market rallied this week ahead of the results, despite some initial concerns that the tests would show more pain in the industry.

Citigroup Inc. rose 8 cents, or 2.1 percent, to $3.94, while Bank of America Corp. rose $1.19, or 9.4 percent, to $13.88. Both banks are among those told by regulators they will need to raise more money. Regions Financial Corp. will also need to raise more money, according to people briefed on the results, as will Wells Fargo & Co. Regions Financial rose 3 cents to $5.86, while Wells Fargo fell $1.64, or 6.1 percent, to $25.20.

Bond prices dropped as demand for government debt waned. The yield on the benchmark 10-year Treasury note jumped to 3.28 percent from 3.16 percent late Wednesday.