Late Selling Weighs on Stocks

Major U.S. stock indexes closed lower Tuesday after earlier rally efforts fizzled. Investors at times seemed to be encouraged by stronger-than-expected reports on consumer confidence and home prices, but the buying never gained much force.

On Tuesday, the 30-stock Dow Jones industrial average finished lower by 8.05 points, or 0.10%, at 8,016.95. The broad S&P 500 index shed 2.35 points, or 0.27%, to 855.16. The tech-heavy Nasdaq composite index fell 5.60 points, or 0.33%, to 1,673.81. On the New York Stock Exchange, 16 stocks were higher in price for every 14 that declined. Nasdaq breadth was 15-11 positive. Trading was moderate.

Treasuries were lower. The dollar index was off. Gold futures were lower. Oil futures fell.

Earlier in Tuesday's session, the Dow received a boost from IBM Corp. (IBM), which raised its dividend. Other blue chips such as Kraft Foods (KFT) and AT&T (T) were moving higher on stronger than-expected consumer confidence and home price data from the Conference Board and S&P Case-Shiller, respectively.

But the swine flu crisis was raising worries the global recession will be extended and possibly deepen.

Sentiment was also hurt by a report that regulators told Citigroup (C) and Bank of America (BAC) to increase their capital levels.

Also Tuesday, the Federal Reserve was set to kick off its two-day meeting. Policymakers were likely to focus on their special lending programs as the chief source of policy stimulus, notes S&P MarketScope.

The World Health Organization, acknowledging the growing threat of swine flu, raised its global pandemic alert, saying the disease is no longer containable. Bloomberg News reports the alarm level, increased to 4 from 3, is at its highest since the warning system was adopted in 2005, and the virus has been confirmed in the U.K., Mexico, the U.S., Canada and Spain. The emphasis worldwide should be on treating patients and strengthening preparations for outbreaks, said Keiji Fukuda, assistant director-general for health security and environment. The Geneva-based WHO isn't recommending travel restrictions.

The Wall Street Journal reported Tuesday that regulators have told Bank of America and Citigroup the banks may need to raise more capital based on early results of the government's so-called stress tests of lenders, according to people familiar with the situation. The capital shortfall amounts to billions of dollars at Bank of America, based in Charlotte, N.C., people familiar with the bank said. Executives at both banks are objecting to the preliminary findings, which emerged from the government's scrutiny of 19 large financial institutions. The two banks are planning to respond with detailed rebuttals, these people said, with Bank of America's appeal expected by today. The findings suggest that government officials are using the stress tests to send a tough message to struggling banks.

In earnings news Tuesday, Pfizer Inc. (PFE) reported first-quarter adjusted earnings per share (EPS) of $0.54, vs. $0.61 one year earlier, on an 8.3% revenue drop. Wall Street was looking for EPS of $0.49. The company maintained its $44 billion-$46 billion 2009 revenue guidance, but cut its $1.34-$1.49 2009 EPS guidance to $1.20-$1.35 to reflect certain costs incurred and expected to be incurred in connection with the pending Wyeth acquisition. Pfizer sees $1.85-$1.95 2009 adjusted EPS.

United States Steel (X) reported a $3.78 first-quarter loss per share, vs. $1.98 EPS, on a 47% sales decline. The company expects a second-quarter operating loss as its order book remains at low levels and idled facility carrying costs continue to be incurred. U.S. Steel added that extremely short lead times, coupled with uncertainty surrounding financial markets and key steel-consuming industries such as automotive and construction, make it difficult to forecast beyond a very short horizon. The company said it will offer 18 million shares and $300 million in senior convertible notes.

Becton, Dickinson & Co. (BDX) posted second-quarter EPS from continuing operations of $1.18 (excluding an $0.11 charge), vs. $1.09, on slightly lower revenue. The charge relates to a settlement agreement with direct purchaser plaintiffs (which includes the company's distributors) in antitrust class actions. Excluding the specified item, BDX reaffirmed that diluted EPS from continuing operations for fiscal 2009 will increase 9%-11% from the $4.46 posted for fiscal 2008; it sees GAAP EPS from continuing operations up 7%-9%.

Before it's here, it's on the Bloomberg Terminal.