NEW YORK - A cautious forecast from FedEx Corp. and a ratings downgrade of 18 banks gave investors new reasons to worry about the economy.
Stocks mostly fell yesterday, though health shares gained as the Senate made tentative steps on a health-care overhaul plan. Generally, the market was held back by FedEx's weak profit forecast and downbeat comments about the economy. Analysts look to shipping companies' business as a gauge of the economy's strength.
Financial stocks saw some of the biggest losses after Standard & Poor's cut its ratings and revised outlooks on big banks. S&P cited concerns that the financial industry would remain volatile and that banks were expected to face greater regulatory oversight.
One bright spot: Consumer prices rose less than forecast in May. Investors have worried that rising prices would threaten a recovery in the economy by curbing demand.
Trading is likely to remain choppy ahead of tomorrow's quarterly "quadruple witching" day, which marks the simultaneous expiration of several different options contracts. Dan Deming, a trader with Strutland Equities in Chicago, said stocks were more likely to gain ground during such times.
The drop this week comes after stocks notched only modest gains last week. The selling has created a break in a three-month rally that had carried the S&P 500 index up 40 percent from 12-year lows. Many traders say expectations for an economic recovery have been too rosy.
The Dow Jones industrial average fell 7.49, or 0.09 percent, to 8,497.18 after moving in and out of positive territory during the day. The broader S&P 500 index fell 1.26, or 0.14 percent, to 910.71, and the Nasdaq composite index rose 11.88, or 0.66 percent, to 1,808.06.
FedEx said its fiscal fourth-quarter loss widened because of hefty onetime charges and lower revenue, and it warned it expects extremely difficult conditions in the next two quarters. Shares of FedEx fell 72 cents to close at $50.70.
BB&T Corp. and Wells Fargo & Co. were among the biggest banks hit with lower ratings. BB&T shares fell 65 cents, or 2.92 percent, to $21.58, while shares of Wells Fargo slid $1.31, or 5.37 percent, to $23.09.
In other trading, shares of Johnson & Johnson, maker health-care products, rose 58 cents, or 1.06 percent, to $55.20. Shares of pharmaceutical-maker Pfizer Inc. gained 42 cents, or 2.97 percent, to $14.58.
Health-care stocks got a boost as the Senate began working on what the government hopes will be a huge overhaul of the health-care system. However, it appeared that the legislation might not get through Congress as quickly as many officials hope.
Crude oil rose 56 cents to settle at $71.03 a barrel after a key government report said crude held in U.S. storage houses fell for the third straight week.