Investors are taking pause Tuesday, a day after stocks logged big gains, as caution returns to Wall Street ahead of results of the government's stress tests of banks.
Stock futures were little changed following a massive advance on Monday that sent one key Wall Street indicator, the Standard & Poor's 500 index, into positive territory for the year and the Dow Jones industrials up more than 200 points. Positive news on the housing market fueled the gains.
Investors are anxious for details on which U.S. banks may need more capital. The stress tests, results of which are due Thursday, are supposed to determine which banks would need more cash if the economy weakens further.
On Tuesday, The Wall Street Journal reported that about 10 of the 19 banks undergoing the tests will be required to boost their capital levels as a buffer against potential future losses. The report cited several unidentified people familiar with the matter.
For weeks, speculation has been mounting about which banks are the most in need of capital. Reports have surfaced indicating that Citigroup Inc., Bank of America Corp. and Wells Fargo & Co., as well as a handful of regional banks, are among that group.
Regulators have said no large institution will be allowed to fail, and have pledged government funds if necessary. But if the tests show more pain in the banking industry than anticipated, analysts believe the market could easily reverse course, after putting in its best two-month performance in nearly 35 years.
Also Tuesday, investors will look to the Institute for Supply Management's April report on the services sector, to be released at 10 a.m. Eastern time.
Ahead of the market's open, Dow Jones industrial average futures dipped 13, or 0.2 percent, to 8,346. Standard & Poor's 500 index futures fell 2.20, or 0.2 percent, to 900.60, while Nasdaq 100 index futures fell 1.00, or 0.1 percent, to 1,421.50.
Over the past two months, investors have become more optimistic about the economy's chances for a turnaround, encouraged by an increasing amount of upbeat data. This has enabled investors to look past evidence that challenges remain, including mixed earnings reports and millions of job losses.
On Monday, investors were heartened by news that pending U.S. home sales rose more than expected for a second straight month of gains, and construction spending rose in March after five months of declines. With Monday's gain, the S&P 500 has soared 34.1 percent since the rally began March 9, its steepest gain over that many days since 1933. The Dow is up 28.7 percent.
Investors are mindful that the stock market typically turns around, on average, about four months ahead of the economy. But analysts warn that the market's advance will continue to be put to the test, and could easily unravel if investors are shaken enough by some piece of disappointing news.
In addition to the looming stress test results, investors are jittery ahead of the closely watched April employment report, due Friday.
Later Tuesday, Federal Reserve Chairman Ben Bernanke will testify before Congress to answer questions about the Fed's multitrillion-dollar efforts to get banks lending freely again and stimulate the economy.
In earnings news, Kraft Foods Inc., the maker of Velveeta, Oreo cookies and Maxwell House coffee, said its first-quarter profit rose a better-than-expected 10 percent even as sales dropped. CVS Caremark Corp.'s profit fell slightly on charges and higher costs, outweighing a 12 percent jump in the drugstore operator's revenue from higher pharmacy sales. And Duke Energy Corp. said its first-quarter earnings fell 25 percent as the recession cut demand for electricity among its industrial customers.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, held steady at 3.16 percent.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell 57 cents to $53.90 in electronic trading on the New York Mercantile Exchange.
Overseas, Hong Kong's Hang Seng index inched up 0.3 percent. In afternoon trading, Britain's FTSE 100 was up 2.8 percent, Germany's DAX index slipped 0.2 percent, and France's CAC-40 fell 0.1 percent. Markets in Japan were closed for a national holiday.
