Investors were hard-pressed Tuesday to find a reason to extend Wall Street’s two-month rally.
Stocks mostly fell after sliding on Monday. Investors shifted into defensive corners of the market, driving up shares of drugmakers like Pfizer Inc. and food makers such as Archer Daniels Midland Co., which tend to hold up better in economic downturns.
The sideways moves come as some traders worry that the economic recovery won’t be as brisk as hoped when stocks were carving big gains over the past eight weeks. The Dow Jones industrials fell about 40 points.
With little news to excite investors, the financial stocks that pounded the market to 12-year lows in March and then led the bounce higher fell for a second day. Even after their slide Monday, bank shares have roughly doubled since early March, as measured by the KBW Bank Index. The sudden jump has some analysts saying those stocks are overdue for more selling.
Retailers fell ahead of a government report on retail sales due out Wednesday and in advance of quarterly results coming out from Macy’s Inc. Wednesday and Wal-Mart Stores Inc. Thursday.
Consumer spending accounts for more than two-thirds of U.S. economic activity so investors will be eager for forecasts from retailers for insight into whether the economy is stabilizing as many traders have been betting.
Analysts said a break in the market’s ascent had been overdue after the Standard & Poor’s 500 index jumped more than 35 percent since early March. The run came as economic and corporate reports signaled the economy could be stabilizing, though in many cases not improving.
“We need to see not just the promise of recovery, but actual data,” said Uri Landesman, head of global growth strategies at ING Investment Management. “The worst of the bear market is certainly behind us, but it doesn’t mean it’s going to be straight up.”
In early afternoon trading, the Dow Jones industrial average fell 43.08, or 0.5 percent, to 8,375.69 after falling 155 on Monday. The S&P 500 index fell 11.73, or 1.3 percent, to 897.51 and the Nasdaq composite index fell 33.93, or 2 percent, to 1,697.31.
Matt Lloyd, chief investment strategist at Advisors Asset Management Inc., said investors have only hit “pause,” not “stop” on the rally and that a slowdown in the climb after the surge from March is healthy.
“We need to kind of walk at a brisk pace as opposed to sprint,” he said.
The market retreated Monday after four banks announced plans to raise capital by selling common stock. Investors were nervous about the added shares in the market even as it was a welcome sign to see banks turn to Wall Street to raise money instead of relying on government bailouts. The extra supply of shares in circulation could push prices lower.
Detroit drew investors’ attention as Ford Motor Co. announced plans to raise cash through a common stock offering. Unlike General Motors Corp. and Chrysler LLC, Ford has been able to avoid needing government aid amid a sharp downturn in auto sales. Chrysler has filed for bankruptcy protection and GM is working on turnaround plans to help it avoid bankruptcy.
Ford fell 67 cents, or 11 percent, to $5.41.
GM shares tumbled to their lowest level since 1933 as investors worried that their shares would lose value if more are added to the market or the company declares bankruptcy. The company faces a June 1 restructuring deadline.
The automaker’s shareholders would be competing with bondholders, the U.S. government and the UAW for stock if the company is reorganized.
GM, one of the 30 stocks that make up the Dow industrials, fell 32 cents, or 22.2 percent, to $1.12.
In other trading, Dow-component Pfizer rose 91 cents, or 6.4 percent, to $15.06, while Archer Daniels rose 15 cents to $25.83.
Homebuilder stocks fell after the National Association of Realtors said home prices slid in nearly nine out of every 10 U.S. cities in the first three months of the year as first-time buyers in search of bargains dominated the market.
Pulte Homes Inc. fell 88 cents, or 7.8 percent, to $10.35, while Toll Brothers Inc. fell 81 cents, or 4 percent, to $19.49.
The Russell 2000 index of smaller companies fell 13.74, or 2.7 percent, to 488.20.
Three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 784.4 million shares.
Bond prices slipped but came off their lows as investors trimmed their appetite for risk and sought out safer investments. Prices gained back some of their losses after the Federal Reserve bought about $6 billion in government debt as part of its effort to drive down interest rates and reduce the costs of loans like mortgages.
The yield on the benchmark 10-year Treasury note rose to 3.18 percent from 3.17 percent late Monday.
Light, sweet crude rose 16 cents to $58.66 per barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies, while gold prices rose.
Overseas, Japan’s Nikkei stock average fell 1.6 percent. Britain’s FTSE 100 fell 0.2 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 fell 0.5 percent.
Copyright 2009 The Associated Press.