Banks Weigh on Dow, While Tech Lifts Nasdaq

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Big banks drove the blue chips into negative territory, while strong performance in the technology sector helped push the Nadsaq into the green Thursday. 

Today's Markets

The Dow Jones Industrial Average fell 40.7 points, or 0.35%, to 11,478, the S&P 500 dipped 3.6 points, or 0.3%, to 1,204 and the Nasdaq Composite rose 15.5 points, or 0.6%, to 2,620. 

Earnings season kicked into high-gear this week, with aluminum-giant Alcoa (AA) posting anemic results.  JPMorgan Chase (JPM), the first of the major banks to report, earned $4.3 billion, or $1.02 a share, in the third quarter, topping estimates of 91 cents a share, but weaker than the $4.4 billion from the same period last year.  JPMorgan shares were off more than 4%, putting considerably pressure on other banks like Bank of America (BAC) and Citigroup (C).

Basic materials and industrial shares were also among the laggards of the day.  However, the technology sector was actually in the green, with heavyweights like Apple (AAPL) and Google (GOOG) rising.  Google is expected to post its quarterly earnings after the closing bell on Thursday. 

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Even with Thursday's losses, the markets had been on a roll recently; indeed, the blue chips are still close to climbing back into the black for the year. 

Traders have been reacting to developments on the European front, specifically signals that policymakers are ready to act to recapitalize the region's banking sector, which has taken a strong hit from the sovereign debt troubles on that side of the Atlantic.  Additionally, Slovakia's parliament agreed to additional powers for the European Financial Stability Facility.  Slovakia was the last of the 17-member euro currency bloc to ratify the changes that give the region's rescue fund significantly more power. 

However, sentiment was dimmed to some extent on Thursday by commentary from the European Central Bank suggesting pushing bondholders to take so-called haircuts on Greek debt as part of a bailout package could threaten already weak European banks.  

The euro recently fell 0.01% to $1.38, while the greenback rose 0.02% against a basket of world currencies. 

Trade Data in Focus

The U.S. trade deficit fell slightly to $45.61 billion in August from $45.63 billion the prior month, while the gap with China hit an all-time high. The deficit, which is calculated by subtracting imports from exports, weighs directly into broader measures of economic growth.  The larger the trade deficit, the more it weighs on Gross Domestic Product. 

Meanwhile, data released earlier showed Chinese exports climbed 17.1% last month from the year before, a much slower pace than the 24.5% in August.  Meanwhile, the world's second biggest economy showed import growth of 20.9%, also weaker than 30.2% in August. 

The slowdown in China, a critical economy, echoes concerns that the global economic recovery has stalled, and policymakers may be running out of tools to jump-start it. 

The number of individuals filing for first-time unemployment benefits fell slightly to 404,000 from 405,000 the week prior, just below estimates of 405,000.  While the weekly data tend to be volatile, market participants have been paying particularly close attention to the labor market that has only slowly recovered from the recession.

Energy markets were in the red amid a strengthening dollar, concerns over demand from China, and selling in equity markets. 

Light, sweet crude fell $1.12, or 1.3%, to $84.44 a barrel.  Wholesale RBOB gasoline rose 1 cent, or 0.21%, to $2.75 a gallon. 

In metals, gold fell $14.10, or 0.84%, to $1,669 a troy ounce. Treasury yields fell: the benchmark 10-year note yields 2.191% from 2.212%. 

Corporate News

Research in Motion (RIMM) shares were under selling pressure for a second day as the company struggles with a global outage of its flagship BlackBerry e-mail service. 

Foreign Markets

The Euro Stoxx 50 slid 1.7% to 2,333, the English FTSE 100 dipped 0.71% to 5,403 and the German DAX tumbled 1.3% to 5,915. 

In Asia, the Japanese Nikkei 225 climbed 0.97% to 8,823 and the Chinese Hang Seng soared 2.3% to 18,758. 

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