Stocks sink; Banks rise on BofA deal

Stocks fall in afternoon trading; Bank of America jumps on news of Buffett's investment

Associated Press
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NEW YORK (AP) -- Stocks fell in afternoon trading Thursday, erasing early gains. Bank of America Corp. led other bank stocks higher on news that Warren Buffett will invest $5 billion in the bank.The rest of the market turned lower. Oil fell and Treasurys rose after the government said more people hit the unemployment line last week.Apple Inc., the world's largest technology company, fell 1 percent after CEO Steve Jobs resigned late Wednesday. Jobs' departure was expected because of his health problems. Richard Gardner at Citigroup recommended investors buy the stock.BofA jumped 11 percent. The troubled bank had lost half its value this year as investors grew worried about its need to raise capital and its liabilities related to subprime mortgages.Other banks also rose after the billionaire investor lent his credibility to Bank of America. Morgan Stanley and Citigroup Inc. rose 3 percent. Financial stocks were the only one of the 10 industry groups in the Standard & Poor's 500 index to rise.The Dow Jones industrial average fell 129 points, or 1 percent, to 11,192 in afternoon trading. It had been up 85 points shortly after the opening bell. The Dow rose 503 points in the first three days of this week.Stocks opened higher but then quickly reversed course. The S&P 500 index fell 12 points, or 1 percent, to 1,165. The Nasdaq fell 27 points, or 1.1 percent, to 2,439.Indexes turned lower shortly after Germany's stock market took a sudden dive. Germany's main index, the DAX, lost 4 percent within 20 minutes. European markets had been trading higher but then followed Germany's DAX down. The DAX trimmed its losses and closed down 1.7 percent.This week's trading has been marked by a series of sudden reversals. Robert Stein, a money manager responsible for $1.2 billion at Astor Asset Management, said questions surrounding the direction of the U.S. economy have made investors uncertain and the stock market more volatile. Gains made one day can quickly disappear the next."We're not seeing anything that's convincingly bearish enough to call another recession, but nothing optimistic enough to suggest that a recovery is going to regenerate," he said.Earlier Thursday, the government reported an increase in the number of first-time claims for unemployment benefits last week. The Labor Department said applications for benefits rose to 417,000, the highest in five weeks. The figure was inflated by a strike at telecom giant Verizon, which ended earlier this week.The S&P 500 index, the benchmark for most money managers, has gained 3.5 percent this week but is still down 10 percent this month.

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