Stocks Hit by Late Sell-Off

U.S. stocks closed lower Wednesday as late-day profit taking robbed the market of earlier gains.

The retreat came in the final hour of trading as press reports said influential analyst Dick Bove of Rochdale Securities downgraded Wells Fargo (WFC) to sell.

Shares of Wells Fargo tumbled along with other banks, and the profit taking spread into the broader market, where recent rallies have sent the Dow industrials and other major indexes to yearly highs.

Besides banks, Boeing (BA) and Wal-Mart (WMT) led the market lower.

On Wednesday, the 30-stock Dow Jones industrial average finished lower by 92.12 points, or 0.92%, at 9,949.36. The broad Standard & Poor's 500-stock index was down 9.66 points, or 0.89%, at 1,081.40. The tech-heavy Nasdaq composite index shed 12.74 points, or 0.59%, to 2,150.73.

Treasuries and the U.S. dollar index fell.

Gold futures were higher.

Oil futures moved above $80 per barrel after the Energy Dept.'s weekly inventory report showed crude oil stocks rose 1.3 million barrels, gasoline stocks fell 2.3 million barrels, and distillates fell 800,000 barrels.

European equity markets finished higher Wednesday, with London stocks up 0.28%, Paris stocks up 0.05%, and Frankfurt stocks up 0.37%. Asian markets ended lower, with benchmark indexes falling 0.03% in Tokyo, 0.30% in Hong Kong, and 0.45% in Shanghai.

"The decline [Wednesday] confirms a multi-day downtrend is underway," wrote Standard & Poor's technical analyst Chris Burba. Burba said early strength in the market attracted aggressive selling late in the session.

"In an environment of healthy demand, the sell-off caused by bearish analyst comments about Wells Fargo would have attracted buying," wrote Burba. "The fact that stocks dropped precipitously indicates supply overpowered demand."

The Federal Reserve's Beige Book report for the Nov. 22 FOMC meeting said the economic recovery was modest. The report saw no inflation pressures and said construction conditions were mixed. The Beige Book report precedes the FOMC's Nov. 22 meeting.

Investors also eyed a fresh batch of earnings reports in Wednesday's session. Many third-quarter reports have exceeded expectations and propelled major equity indexes to their highest levels in a year, notes S&P MarketScope.

Fed Governor Tarullo did not comment on monetary policy or the economy in his speech Wednesday on "Confronting Too Big to Fail." He said the issue, and the associated moral hazard problems, must be at the center of the financial markets' overhaul. He would look to rectify the shortcomings of the regulations that failed, including strengthening capital, liquidity and risk management requirements. He also believes a special capital requirement might be necessary, one based on the systemic importance of a firm.

The time for the Fed to start pulling back its extensive support for the economy is not close at hand, and policymakers have time to decide what sequence of steps they will take, San Francisco Fed President Janet Yellen said Tuesday night. "We have used the language of an extended period," Yellen told reporters after a Fed conference. "This is not something I anticipate happening over the next several months. Certainly not." Yellen's comments were in keeping with recent statements by the Fed which have emphasized that while the U.S. economy may be emerging from recession, the recovery will be tepid and the central bank is in no hurry to raise interest rates. In economic news Wednesday, the Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week to Oct. 16 decreased 13.7% to 641.0, its lowest since the week ended Sept. 11. The MBA's seasonally adjusted purchase index fell 7.6% to 268.8, the lowest since the week ended Aug. 7. The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.07%, up 0.05 percentage point from the previous week.

The ABC News consumer comfort index fell two points to -50 in the week ended Oct.18 -- its worst level since mid-July. The survey said 11% of respondents expressed confidence in the economy, the same as the week before. Also, 41% of those polled said their own finances were in good standing, down from 42% the prior week. In assessing the buying climate, 23% of respondents said it was good, down from 25% a week earlier.

Among companies in the news, Yahoo Inc. (YHOO) reported third-quarter non-GAAP earnings per share (EPS) of 15 cents after the close of trading Tuesday, vs. 15 cents EPS one year earlier, despite a 12% revenue drop. Wall Street was looking for EPS of 7 cents.

Boeing (BA) reported a third-quarter loss of $2.23 on Wednesday, vs. 96 cents EPS one year earlier. Wall Street was looking for $2.12 loss. Boeing said current results reflect, among other things, previously announced reclassification to R&D of costs incurred through July for the first three 787 flight-test airplanes, which impacted EPS by $2.46.

SLM Corp. (SLM) reported third-quarter core EPS of 26 cents, vs. 19 cents EPS one year earlier, on lower total interest expense and higher net interest income. S&P maintains buy.See Pg. 4

Eli Lilly & Co. (LLY) posted third-quarter pro forma non-GAAP EPS of $1.20 vs. 98 cents EPS one year earlier, on a 4.8% revenue rise. Wall Street was looking for EPS of $1.02.

Altria Group (MO) reported third-quarter adjusted EPS of 48 cents, vs. 46 cents, on 20% higher net revenue.

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