Markets close lower as ‘stress tests’ loom

UPDATED:

Wall Street closed Tuesday with losses, ahead of reports by the federal government later this week on unemployment and the banking industry.

The Dow Jones Industrial Average closed at 8,410.65, down 16.09 points. The broader Standard & Poor’s 500-stocks Index closed at 903.80, down 3.44 points, and the tech-heavy NASDAQ closed at 1,754.12, down 9.44 points.

The federal government is scheduled Thursday to release the findings of its so-called “stress tests” on the country’s 19 biggest financial institutions and on Friday to announce monthly unemployment numbers.

The tests reportedly have found that Bank of America Corp., Citigroup Inc., Wells Fargo and a few regional banks would need more capital to cushion against a more prolonged or severe recession.

Bank of America stock closed Tuesday at $10.84, up 4.43 percent. Wells Fargo stock closed at $23.27, down 4.04 percent.

Federal Reserve Chairman Ben S. Bernanke’s midmorning report to Congress’ Joint Economic Committee on the U.S. economy appeared to have little impact on the markets. However, he appeared to foreshadow the reports by saying a major focus of the tests was the capital “buffers” and that record-high unemployment likely will increase until the economy begins to recover later this year.

The markets opened following big gains Monday on upbeat reports about housing contracts and construction spending. The Dow gained 214 points Monday, to close at 8,426, and the S&P moved into positive territory for the year.

The major markets are up roughly 30 percent since hitting 11-year lows in early March — a rally that largely has followed first-quarter reports by major U.S. banks that were better than expected.

The recent gains appear to show the worst of the recession might be over, but investors remain cautious and the markets still are down significantly from their October 2007 highs.

Food-maker Kraft Foods Inc. was among several major U.S. companies Tuesday reporting first-quarter earnings.

Kraft said its first-quarter earnings exceeded expectations by 10 percent, despite declining sales. Its stock closed at $25.22, up 3.96 percent.