16:25 ET Dow -80.05 at 7270.89, Nasdaq -16.40 at 1425.43, S&P -8.24 at 764.90 :
[BRIEFING.COM] A rally in financial stocks helped the broader market overcome a fit of early weakness, but the advance proved unsustainable as stocks finished the session more than 1% lower.
Stocks spent the majority of the session trading in the red as traders opted to take profits from Tuesday's 4% advance. The selling effort came amid a lack of positive headlines and continued uncertainty in the financial system, which failed to improve after President Obama gave his first speech before a joint meeting of Congress.
The need for additional capital amid such uncertainty led both Lincoln National (LNC 11.21, -1.83) and Allstate (ALL 17.57, -1.07) to cut their quarterly dividends. Meanwhile, an article in The Wall Street Journal seemed to suggest Wells Fargo (WFC 13.40, +0.35) should cut its dividend to help improve the bank's capital ratios.
The Fed and Treasury released key details of its bank stress-test plan. Officials will assess potential losses at banks and estimated resources to absorb those losses.
Capital provided under the plan will come in the form of preferred stock that is convertible into common equity at a 10% discount to the price prevailing prior to Feb. 9. Securities under the plan will carry a 9% dividend yield and will be convertible at the issuer's option.
The plan essentially backstops financial institutions, though the banks receiving capital will be required to submit monthly reports on their lending and will be subject to restrictions on paying quarterly common stock dividends, repurchasing shares, and pursuing cash acquisitions.
Financial stocks gave ground in the wake of the announcement, but eventually rallied to a 3.8% gain. Financials finished the session with a 0.5% loss as sellers pushed back, but that was still better than the 6.5% loss that financials traded with at their session lows.
Nine of the 10 sectors finished lower. Telecom (+1.0%) was the only sector in the S&P 500 to finish with a gain.
There was only a trickle of earnings announcements ahead of the opening bell, none of which received much attention from the broader market. Still, trading volume was above-average as nearly 1.8 billion shares traded hands on the NYSE.
The only item on the economic calendar was a bleak January existing homes sales report. Sales fell more than expected to their lowest level since 1997. Many of the sales were distressed, contributing to a near 15% year-over-year drop in the median home price. Inventory supply increased slightly to 9.6 months.
..Nasdaq 100 -0.9%. ..S&P Midcap 400 -1.4%. ..Russell 2000 -2.7%. ..NYSE Adv/Dec 1208/1878. ..NASDAQ Adv/Dec 799/1863.