NEW YORK — Investors might think the economy is stabilizing, but they’re not ready to celebrate.
Wall Street slid Thursday following a surge earlier in the week as traders braced for a release of the government report cards on the nation’s biggest banks and for the April jobs report today.
Major market indicators dropped more than 1 percent, including the Dow Jones industrial average, which lost 102 points after gaining nearly the same amount Wednesday.
Investors pocketed gains ahead of the release of the government’s stress tests on banks, which largely met with investors’ expectations after news reports this week on which financial companies would be asked to raise money.
Stock futures turned higher late Thursday after the government released the results and said 10 of the nation’s 19 largest banks need a total of about $75 billion in new capital to withstand losses if the economy were to worsen.
The market rose early on but quickly reversed course as investors looked past upbeat reports on the job market and retail sales and decided to cut their holdings after what had been a 4.8 percent gain this week in the Standard & Poor’s 500.
“With the rise we’ve seen lately, there’s no sense leaving it all on the table,” said Dan Cook, analyst at IG Markets.
The Dow ended down 102.43, or 1.2 percent, to 8,409.85 a day after the blue chips jumped 102 points to close above the 8,500 level for the first time in four months.
The S&P 500 index fell 12.14, or 1.3 percent, to 907.39, and the Nasdaq composite index fell 42.86, or 2.4 percent, to 1,716.24.
Financial stocks sold off in afternoon trading after weak demand at a Treasury- bond auction raised concerns among investors about the government’s ability to raise funds to fight the recession.
The government had to pay greater interest than expected in a sale of 30-year Treasurys. That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic-recovery plans.
The market seems to already be expecting positive news on the economy and is now looking for the next catalyst to take stocks higher after a surge of more than 30 percent from 12-year lows in early March.
“This is a market that is starting to bake in a lot of positive surprises,” said Craig Peckham, a market strategist at Jefferies & Co.
