Market Snapshot October 21, 2009, 4:30PM EST

Stocks Hit by Late Sell-Off

Indexes reversed earlier gains to end Wednesday's session in the red after a negative analyst note on Wells Fargo sparked selling

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U.S. stocks closed lower Wednesday as late-day profit taking robbed the market of earlier gains.

The retreat came in the final hour of trading as press reports said influential analyst Dick Bove of Rochdale Securities downgraded Wells Fargo (WFC) to sell.

Shares of Wells Fargo tumbled along with other banks, and the profit taking spread into the broader market, where recent rallies have sent the Dow industrials and other major indexes to yearly highs.

Besides banks, Boeing (BA) and Wal-Mart (WMT) led the market lower.

On Wednesday, the 30-stock Dow Jones industrial average finished lower by 92.12 points, or 0.92%, at 9,949.36. The broad Standard & Poor's 500-stock index was down 9.66 points, or 0.89%, at 1,081.40. The tech-heavy Nasdaq composite index shed 12.74 points, or 0.59%, to 2,150.73.

Treasuries and the U.S. dollar index fell.

Gold futures were higher.

Oil futures moved above $80 per barrel after the Energy Dept.'s weekly inventory report showed crude oil stocks rose 1.3 million barrels, gasoline stocks fell 2.3 million barrels, and distillates fell 800,000 barrels.

European equity markets finished higher Wednesday, with London stocks up 0.28%, Paris stocks up 0.05%, and Frankfurt stocks up 0.37%. Asian markets ended lower, with benchmark indexes falling 0.03% in Tokyo, 0.30% in Hong Kong, and 0.45% in Shanghai.

"The decline [Wednesday] confirms a multi-day downtrend is underway," wrote Standard & Poor's technical analyst Chris Burba. Burba said early strength in the market attracted aggressive selling late in the session.

"In an environment of healthy demand, the sell-off caused by bearish analyst comments about Wells Fargo would have attracted buying," wrote Burba. "The fact that stocks dropped precipitously indicates supply overpowered demand."

The Federal Reserve's Beige Book report for the Nov. 22 FOMC meeting said the economic recovery was modest. The report saw no inflation pressures and said construction conditions were mixed. The Beige Book report precedes the FOMC's Nov. 22 meeting.

Investors also eyed a fresh batch of earnings reports in Wednesday's session. Many third-quarter reports have exceeded expectations and propelled major equity indexes to their highest levels in a year, notes S&P MarketScope.

Fed Governor Tarullo did not comment on monetary policy or the economy in his speech Wednesday on "Confronting Too Big to Fail." He said the issue, and the associated moral hazard problems, must be at the center of the financial markets' overhaul. He would look to rectify the shortcomings of the regulations that failed, including strengthening capital, liquidity and risk management requirements. He also believes a special capital requirement might be necessary, one based on the systemic importance of a firm.

The time for the Fed to start pulling back its extensive support for the economy is not close at hand, and policymakers have time to decide what sequence of steps they will take, San Francisco Fed President Janet Yellen said Tuesday night. "We have used the language of an extended period," Yellen told reporters after a Fed conference. "This is not something I anticipate happening over the next several months. Certainly not." Yellen's comments were in keeping with recent statements by the Fed which have emphasized that while the U.S. economy may be emerging from recession, the recovery will be tepid and the central bank is in no hurry to raise interest rates.