US stocks reduced earlier gains on Tuesday as financial shares came under pressure after several companies announced stock offerings. Major indices had been higher in morning action after better-than-anticipated housing data bolstered hopes that the recession is abating.
Declines among financial shares weighed on the broad market, due to fears about the diluting effect of banks' stock offerings, including Dow component J.P. Morgan Chase & Co, down more than 3 percent. The KBW bank index fell 2 percent. Several US banks are raising capital to show they are capable of functioning without government support, in a move to free themselves from tight regulations after they received billions of dollars from the Treasury Department's Troubled Asset Relief Program, or TARP.
"There's been a lot of new issues on financials. They want to cover the TARP and they have issued a lot of stock in the last few days so I think that is why they are a little bit heavy," said Todd Leone, managing director at Cowen & Co in New York. The Dow Jones industrial average rose 2.45 points, or 0.03 percent, to 8,723.89. The Standard & Poor's 500 Index edged up 0.20 of a point, or 0.02 percent, to 943.07. The Nasdaq Composite Index gained 3.10 points, or 0.17 percent, to 1,831.78.
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