Costs to Mend Deficit Weigh on Sentiment

Stocks continued to trade in a volatile range today, and early gains were erased as traders digested the impact the Obama budget plan would have on earnings of health-care companies as well as increased taxes that would be required to pay for the plan and reduce the deficit. Financials were higher, despite a report from the FDIC that the number of troubled banks grew during 4Q. In equity news, General Motors reported a huge loss and a cash burn of $6.2 billion in 4Q, JPMorgan said it expects losses in its home equity portfolio, IBM reiterated 2009 guidance and said it is repurchasing shares in the market, Sears Holdings beat the Street, and Flowserve reported earnings ahead of analyst estimates and raised its dividend. Eli Lilly & Co and AstraZeneca said the Obama health-care plan would cost them millions of dollars of revenues. Sallie Mae fell on the Obama plan but said it was committed to delivering federal student loans regardless of the funding source. Treasuries were lower despite a plunge in durable goods orders, a larger-than-expected drop in new home sales, and an all-time high in continuing jobless claims.

The Dow Jones Industrial Average fell 89 points (1.2%) to close at 7,182, the S&P 500 Index lost 12 points (1.6%) to 753, and the Nasdaq Composite decreased 34 points (2.4%) to 1,391. In moderate volume, 1.5 billion shares were traded on the NYSE, and 2.4 billion shares were traded on the Nasdaq. Crude oil rose $2.72 to $45.22 per barrel, wholesale gasoline gained $0.13 to $1.30 per gallon, and gold fell $8.15 to $945.68 per ounce.