US stocks fell on Wednesday, led by financials in a late-stage sell-off, after the Federal Reserve gave a more pessimistic view on the economy, tempering hopes for a quick recovery. The Fed cut its 2009 forecast for gross domestic product and raised its outlook for unemployment, undercutting recent optimism that the economy might be turning the corner.
Financial shares had led the market higher in morning trading after a successful share offering from Bank of America boosted optimism about the sector, but they reversed course as investors booked profits. Shares of Goldman Sachs fell 3.3 percent to $136.44 and J.P. Morgan lost 3.5 percent to $34.55. The KBW bank index lost 2.7 percent.
"It sounds as though they (the Fed) are a little less excited about the economy than they were originally or as we were led to believe," said Paul Nolte, director of investments at Hinsdale Associates in Hinsdale, Illinois. "It's certainly not encouraging of the green shoots that everybody else is talking about." Technology shares were also a negative as Hewlett-Packard, the world's biggest PC maker, gave a disappointing outlook for 2009.
The stock fell 5.22 percent to $34.67 and was the biggest drag on the Dow. The Dow Jones industrial average fell 52.57 points, or 0.62 percent, at 8,422.28. The Standard & Poor's 500 Index lost 4.64 points, or 0.51 percent, at 903.49. The Nasdaq Composite Index was off 6.70 points, or 0.39 percent, at 1,727.84.
Energy stocks also lost ground even as crude oil surged. Shares of Exxon Mobil fell 1.3 percent to $69.61 and was among the Dow's top drags. But stocks considered to be defensive plays were among gainers, including consumer staples and healthcare.
McDonald's rose 4.4 percent to $56.25 and was the biggest boost to the Dow after Deutsche Bank recommended a "buy" on the world's biggest fast-food chain. Procter & Gamble Co, the maker of Tide laundry detergent and Pampers diapers, rose 2 percent to $54.02 after Barclays raised the stock to "overweight." On the healthcare front, Merck & Co rose 1.2 percent to $26.09, making it one of the standouts on the Dow.
On Nasdaq shares of big cap tech stocks were among the top drags following the disappointment from Hewlett-Packard, a technology bellwether. Apple Inc fell 1.2 percent to $125.87, while Google Inc fell 0.4 percent to 397.18. US front-month crude settled up 3.2 percent to $62 per barrel on New York Mercantile Exchange.
Trading was active on the New York Stock Exchange, with about 1.65 billion shares changing hands, above last year's estimated daily average of 1.49 billion, while on Nasdaq, about 2.30 billion shares traded, above last year's daily average of 2.28 billion. Advancing stocks outnumbered declining ones on the NYSE by 1,591 to 1,452 while decliners beat advancers on the Nasdaq by 1,453 to 1,239.
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