U.S. stocks erased gains in the final hour of trading, pulling the Standard & Poor’s 500 Index down from a two-year high, after a probe of insider trading reportedly widened and President Barack Obama said he’ll push to overhaul the tax code in two years.
3M Co., JPMorgan Chase & Co. and Hewlett-Packard Co. lost at least 1.5 percent for the biggest declines in the Dow Jones Industrial Average as the 30-stock gauge erased an 89-point rally. Citigroup Inc. gained 3.8 percent after the Treasury sold its remaining stake. New York Times Co. added 4.1 percent after forecasting print-ad revenue improvement.
The S&P 500 rose 0.1 percent to 1,223.75 at 4 p.m. in New York after surging 1 percent earlier. The Dow lost 3.03 points, or less than 0.1 percent, to 11,359.16.
“It all happened at the same time, taking the market off its highs,” said Michael Nasto, senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “Investors got a little spooked during Obama’s press conference,” he said. “Then, we had news that the SEC may widen the insider trading probe. That took some wind out of stocks.”
The S&P 500 traded for about 1,233.50 at 2:40 p.m. before falling after Obama said he will fight to let the tax cuts for the wealthiest taxpayers expire in two years. Obama defended the deal he struck with Republicans to temporarily extend Bush-era tax cuts as necessary to spare middle-income Americans a tax increase and to spur job creation.
Equities also slumped at the end of the day after Reuters said U.S. authorities widened their investigation of insider trading on Wall Street, issuing subpoenas to “several large hedge funds” it didn’t identify. Reuters cited people familiar with the investigation that it didn’t name.
The stock market’s gains earlier in the day were driven by Obama’s agreement to extend tax cuts and the Treasury’s sale of $10.5 billion in Citigroup stock, which brought the country’s third-biggest bank a step closer to independence from the government following a $45 billion bailout in 2008.
“The announcement of a compromise on taxes is a net positive and takes off the table a great degree of uncertainty,” said Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., which oversees about $90 billion in client assets. “The U.S. government wants to rehab companies and then exit its role as an investor, as happened with Citigroup and General Motors. Stocks certainly have room to move higher.”
3M fell the most in the Dow, dropping 3.1 percent to $84.19. The maker of Scotch tape and optical films forecast earnings of $6.10 a share at most in 2011, including pension costs. Analysts, on average, estimated $6.20 a share, according to a Bloomberg survey.
Talbots Inc. had the biggest decline in the Russell 2000 Index, plunging 23 percent to $8.81. The women’s clothing retailer cut its forecast for earnings this year to no more than 78 cents a share, below a previous estimate of as much as 92 cents a share.
Banks had the biggest decline in the S&P 500 among 24 industries. KeyCorp slumped 2.8 percent to $7.95, while Comerica Inc. dropped 1.7 percent to $38.76.
Citigroup gained 3.8 percent to $4.62. The Treasury still owns warrants on 465.1 million Citigroup shares, and the Federal Deposit Insurance Corp. holds $800 million of the bank’s trust- preferred securities on behalf of the Treasury.
New York Times increased 4.1 percent to $9.76 after saying it expects fourth-quarter print advertising to improve from the third quarter. The company said it sees a decline of about 4 percent year-over-year.
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