By Kristina Peterson
U.S. stocks slipped in late trading Monday as jitters ahead of
U.S. midterm elections and expected moves from the Federal Reserve
prompted traders to duck out of a market whose long climb is now
raising some eyebrows.
The Dow Jones Industrial Average (DJI) shed 23 points, or 0.2%,
to 11095 in recent trading, reversing an earlier triple-digit
climb.
Financial stocks slid into the red after a ProPublica report
said the U.S. Securities and Exchange Commission is investigating
whether J.P. Morgan Chase (JPM) allowed Magnetar Capital, a hedge
fund, to improperly select assets for a $1.1 billion deal backed by
subprime mortgages. J.P. Morgan shed 1.1%, while other financials
tumbled. First Horizon National (FHN) slid 6.6%, Marshall &
Ilsley (MI@) fell 5% and BB&T (BBT) shed 3.3%.
Traders said the sector slipped after the ProPublica report
began to circulate.
"The weakness seems to be attributed to this report on the SEC
investigation," said Stephen Carl, head equity trader at The
Williams Capital Group.
Still, traders' focus is largely locked on events later this
week, including Tuesday's midterm elections and Wednesday's
conclusion of a meeting of the Federal Reserve's policy-making
committee. The stock market has rallied since early September on
expectations that the Fed will resume purchasing bonds in order to
stimulate the economy.
In afternoon trading, the market cooled its earlier climb,
fueled by a round of better-than-expected economic reports. Traders
said they wouldn't be surprised to see a selloff after the election
and Fed meeting given the market's steady climb since September
amid a surge of market optimism.
"I am concerned about the overhang of long to shorts in the
market and the amount of bullish sentiment," said John Brady,
senior vice president at MF Global. Given the week's major
political and economic events, "you're probably seeing some guys
taking some chips off the table," he said.
The market climbed earlier Monday, fueled by encouraging
manufacturing reports from the U.S. and China, as well as an
unexpected rise in U.S. construction spending.
"Generally with an election tomorrow you'd have almost nothing
happening in the market today," said Jennifer Ellison, principal at
Bingham, Osborn & Scarborough. "Regardless of who wins tomorrow
or what the Fed does, if we don't have corporate earnings growth
and don't have people going back to work, the market's not going to
continue going up at the pace it has been," she said.
The Nasdaq Composite (RIXF) shed 0.5% to 2496. The S&P 500
edged down 0.3% to 1179. The S&P's utilities sector led its
declines, weighed by a 2.8% drop in NextEra Energy. The company
said it expects the year's profit will come in "the lower half" of
its prior forecast. Dominion Resources (Virginia) shed 3.1%.
Among companies reporting earnings, Baker Hughes (BHI) climbed
3.7%. Its third-quarter earnings soared as the oilfield-services
company benefited from a rebound in North America, a seasonal
recovery in Canada and the April acquisition of BJ Services.
Anadarko Petroleum (APC) rose 1.1% ahead of its earnings report
after the market's close.
Ambac Financial Group (ABK) tumbled 42% after the bond insurer
warned that its board declined to make an interest payment and said
it is negotiating plans for a prepackaged bankruptcy proceeding
with senior debtholders. If it can't reach an agreement for such a
plan, it plans to file for Chapter 11 bankruptcy protection by the
end of the year.
EXCO Resources (XCO) jumped 30% after Chairman and Chief
Executive Douglas Miller offered to buy the company, valuing it at
about $4.4 billion. The company's board said it intends to
establish a special committee of independent directors to consider
the proposal.
Wilmington Trust (WL) sank 42% after it announced a merger with
M&T Bank for a stock deal valued at about $351 million. The
Delaware banker also reported its third-quarter loss widened
sharply as its loan-loss provisions soared and as its mounting
losses required it to establish a "significant" tax-valuation
allowance. Shares of M&T Bank (MTB) gained 4.4%.
Fortinet (FTNT) surged 6.3% after Bloomberg News reported late
Friday that International Business Machines has approached the
network-security systems maker about a possible takeover.
Trucking company YRC Worldwide (YRCW) rose 15% after members of
the Teamsters union voted in favor of ratifying the continuation of
concessions wage and pension reductions, along with new work rules
that J.P. Morgan Chase says gives YRC additional flexibility.
The U.S. dollar (DXY) strengthened against both the euro and the
yen. The euro was recently trading at $1.3874, down from $1.3947
late Friday in New York.
Demand for Treasurys slipped, pushing the 10-year note's yield
(UST10Y) up to 2.62%. Crude-oil prices slipped below $83 a barrel,
while gold futures also declined.