Stock gains erode in late collapse

NEW YORK —
A late swoon erased a day-long stock rally Tuesday, highlighting
investors’ lingering jitters about the several big economic
announcements due over the next few days.

Strong earnings and consumer-confidence data kept
major averages in positive territory through most of the session. But
those gains fell apart in the last hour or so as sellers cashed out
rather than risk sticking around for any nasty surprises.

The Dow Jones Industrial Average was up 88 points at
its intraday high but ended down 2.57 points at 10,194.29. The Nasdaq
Composite Index was off 0.3 percent.

The S&P 500 was off 0.4 percent, led by a 1.7
percent slide in its financial sector, which had traded in positive
territory early in the day. American International Group slid 6.5 percent, Goldman Sachs Group Inc. fell 2.7 percent, and JPMorgan Chase was down 2 percent.

Wall Street faces several big risks from events taking shape in Washington this week.

Through the end of the week, traders will digest
hearings on the bailout of AIG, an interest-rate decision from the
Federal Reserve, a reconfirmation battle for Federal Reserve Chairman Ben Bernanke, and a State of the Union Address in which President Barack Obama may offer new details on his proposal to restrict banks’ speculative trading.

“People right now are trying to protect their gains
in the financials, which have been the leading sector in the rally off
last year’s lows,” said Brian G. Belski, chief investment strategist at Oppenheimer Asset Management in New York. “They’re worried about how big the bat will be that’s being swung in Washington.”

Trading volume was light as some participants stayed on the sidelines altogether. Composite turnover in New York Stock Exchange-listed companies was 4.8 billion shares, below recent totals over 6 billion shares posted during a three-day selloff last week.

Some traders worried that the recent pattern of
late-day swoons and robust volume on the days with the biggest losses
may reflect bearish sentiment among investors that will fuel a broader
market correction.

“You have a lot of reasons as an investor not to (hold stocks) overnight,” when adverse news might break in Washington or from a foreign central bank while U.S. markets are closed, said Art Hogan, chief market analyst, Jefferies & Co.

Among the market’s bright spots on Tuesday was Travelers Cos.,
which rose 2.7 percent after the insurer said its fourth-quarter
earnings jumped 60 percent, hitting a new record since the company went
public in 2002.

Apple also posted record profits and saw its shares rally 1.4 percent as a result.

However, Verizon
fell 1.7 percent and weighed on the broader telecom sector after the
industry giant posted a quarterly loss stemming from one-time costs
associated with layoffs.

“We’re still biased toward equities this year, but investors are going to have to adjust their expectations,” said E. Keith Wirtz, chief investment officer at Fifth Third Asset Management in Cincinnati.
“You have a lot of information coming into this market right now,
especially on the political and regulatory fronts, at a time when we’re
coming off a really strong nine-month rally. It’s going to take awhile
to digest that.”

In economic news, the Conference Board, a private
research group, said that its reading of U.S. consumer confidence rose
for the third consecutive month in January, beating expectations.

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