Stocks Rally Loses Steam As Financials Lead Decline

NEW YORK (MarketWatch) -- U.S. stocks on Friday erased early gains, with financials weighing on the market as new concerns about bond insurers overtook cheer that came with solid quarterly results from International Business Machines Corp. and General Electric Co.

Talk from President Bush on the need for a fiscal stimulus package failed to bolster sentiment.

"Most people know this is just political noise; our problems are a lot bigger than this," said Peter Boockvar, equity strategist at Miller Tabak.

After a triple-digit rise, the Dow Jones Industrial Average fell 37.4 points to 12,121.8, with 17 of its 30 components declining.

The Dow's early advance was bolstered in part by IBM , up 2.5%, in the wake of its quarterly report, which had the tech giant posting 12% earnings growth.

Also adding to early blue-chip gains, GE advanced 3.2% after the industrial bellwether reported a fourth-quarter profit rise of 4%. .

Dow decliners included American International Group Inc. , off 5.7%, and Merck, down 3.4%.

The S&P 500 dropped 10.85 points to 1,322.4, while the Nasdaq Composite fell 2.45 points to 2,344.45.

Mixed data

Stocks had retained their gains after the Conference Board released its leading-economic-indicators index, which sank 0.2% in December. .

More bullish data came from the University of Michigan's preliminary consumer-sentiment survey for January, which rebounded to 80.5 in January from 75.5 in December. .

Volume came to 1 billion shares at the New York Stock Exchange and 1.2 billion shares on the Nasdaq. On both, decliners outran advancers 2 to 1.

Advanced Micro Devices Inc. gained 9.6% after an earlier decline after the company reported a profit drop.

Schlumberger Ltd. continued its sell-off, dropping 9.1% in early trade after the well-site specialist missed fourth-quarter earnings targets. .

Sprint Nextel Corp. plunged 26% after it said it would cut 4,000 jobs and shutter 8% of its retail stores in the face of stiff competition.

On the New York Mercantile Exchange, crude-oil futures lost 14 cents to $89.99, while gold futures fell $1.3 to $879.20.

On Thursday, stocks were hammered, with financial shares especially hard hit, as worries about the global economy prevailed. The Dow shed more than 300 points, or 2.5%.

By Kate Gibson