Stocks open lower, extend losses to 2nd day

New York Stock ExchangeWall Street extended its losses into a second day Tuesday as worries about banks’ balance sheets and poor first-quarter earnings reports intensified.

The Dow Jones industrial average dropped more than 150 points while the broader indexes fell more than 1.5 percent.

Word that the International Monetary Fund was set to forecast $4 trillion in bad assets on banks’ books added to concerns about the financial industry. Published by The Times of London, the report underscored investors’ fears that the U.S. government’s recent efforts to purge banks of troublesome loans might not work.

Meanwhile, investors are bracing for the coming flood of first-quarter earnings reports. Aluminum giant Alcoa Inc. will kick off earnings season Tuesday after the close of the market.

Investors have been more optimistic in recent weeks, sending the major indexes up more than 20 percent from 12-year lows in early March on increasingly positive news about the economy. But many analysts have warned that the rally might not be sustainable, especially as first-quarter earnings loom.

“I don’t think anybody is making a bet on improvement yet,” said Jon Biele, head of capital markets at Cowen & Co. “There is still a very much wait-and-see attitude that is weighing heavily on the market.”

The reports, which will likely give investors some sense of where the economy is headed over the next several months, could easily upset the market if they are worse than expected, analysts say.

In early morning trading, the Dow Jones industrial average dropped 155.07, or 1.9 percent, to 7,820.78. The Standard & Poor’s 500 index fell 17.15, or 2.1 percent, to 818.33, while the Nasdaq composite index fell 29.17, or 1.8 percent, to 1,577.54.

Financial stocks helped push the market to its first loss in five days on Monday, and are likely to remain a top focus for investors. Most analysts contend that an economic recovery is not possible until banks are restored to health.

The industry was jolted Monday after the Treasury Department delayed a program designed to help banks unload soured loans from their books and a prominent analyst said losses at banks are likely to exceed Depression-era levels.

Investors had been more upbeat about banks in recent weeks, buoyed by remarks from several bank CEOs last month that business was better than expected. But the latest news brought investors’ worries about rising loan losses and bad assets to the forefront once again.

Alcoa, the first Dow component to post quarterly results, is expected to report a first-quarter loss on Tuesday, setting the tone for potentially more dismal results to come. Shares dropped 32 cents, or 4.1 percent, to $7.59 in early trading.

Analysts and investors don’t anticipate the reports to be good, but are hoping that they at least meet or exceed already low expectations.

There is little by way of economic data expected Tuesday.

Bond prices rose, pushing the yield on the 10-year note to 2.90 percent from 2.93 percent late Monday.

In other trading, the Russell 2000 index of smaller companies fell 7.03 or 1.6 percent to 440.53.

Declining issues outnumbered advancers by about seven to one on the New York Stock Exchange where volume came to 129.3 million shares.

The dollar was mixed against other major currencies. Gold prices rose.

Light, sweet crude fell $1.35 to $49.70 a barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average fell 0.3 percent and Hong Kong’s Hang Seng index fell 0.5 percent. In afternoon trading, Britain’s FTSE 100 was down 1.8 percent, Germany’s DAX index was down 1.4 percent, and France’s CAC-40 was down 1.7 percent.

Copyright 2009 The Associated Press.