U.S. Stocks End Mixed as Dow Snaps Four-Day Slide

10/12/2012| 07:06am US/Eastern

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The Dow Jones Industrial Average squeezed out a modest advance to wrap up a tough week for the stock market, as worries about bank profits balanced off against a jump in consumer sentiment.

The blue-chip Dow finished with a gain of 2.46 points, or 0.02%, to 13328.85 Friday, after rising by as many as 75 points in early trading. The Standard & Poor's 500-stock index declined 4.25 points, or 0.30%, to 1428.59, while the Nasdaq Composite lost 5.30 points, or 0.17%, to 3044.11.

Throughout the day, investors weighed an unexpected jump in U.S. consumer sentiment to its highest level in five years against worries from U.S. banks.

Financials were the heaviest weight on the downside, after earnings reports from Wells Fargo & Co. (>> Wells Fargo & Company) and J.P. Morgan Chase & Co. (>> JPMorgan Chase & Co.). Wells Fargo fell 2.6% after the fourth-largest U.S. bank reported third-quarter revenue that missed expectations, overshadowing a slight earnings beat.

Particularly worrying for some investors was that net interest margin, the profit margin from lending and investing--by far the bank's biggest business--fell 0.25 percentage points, to 3.66%, far worse than the 0.17 percentage-point decline Chief Financial Officer Timothy Sloan had predicted only a few weeks ago.

Bank of America Corp. (>> Bank of America Corp), American Express Co. (>> American Express Company) and J.P. Morgan were among the worst performers on the Dow. Also suffering were SunTrust Banks (>> SunTrust Banks, Inc.), Regions Financial Corp. (>> Regions Financial Corporation), Huntington Bancshares (>> Huntington Bancshares Incorporated) and Fifth Third Bancorp (>> Fifth Third Bancorp), each of which fell 3% or more.

The declines for J.P. Morgan came even after the country's largest bank reported third-quarter earnings and revenue that handily beat analyst estimates, boosted by declines in provisions for credit losses and a jump in mortgage originations. Also, losses in the quarter stemming from its "London Whale" trading debacle in April were less than feared.

"The market is concerned about margins over time. What we saw as strength items were things like fixed-income trading and ancillary benefits...that are not likely to persist over time," said Jeff Morris, head of U.S. equities at Standard Life Investments, which manages about $247 billion in assets. "What you're left with is that the benefits are more fleeting, and the concerns are more persistent."

In U.S. economic headlines, a preliminary reading of the Thomson Reuters/Univ. of Michigan consumer sentiment index for October registered at 83.1, the highest level since September 2007 and well above expectations for a slight decline to 78, from 78.3 in September.

Separately, wholesale prices increased 1.1% in September from a month earlier, higher than estimates. But so-called core prices, which strip out volatile energy and food components, were unchanged from August, below expectations.

In the euro zone, industrial production rose 0.6% in August from July, compared with expectations of a 0.4% decline. But European stocks edged slightly lower, as uncertainty persisted over whether Spain would seek bailout funds.

The Stoxx Europe 600 declined 0.5% after the head of the Organization of Economic Cooperation and Development said the apparent delay in Spain's request for bailout funds and in the deployment of the European Central Bank's bond-buying plan erodes the credibility of the euro zone's plan.

Asian markets were mixed. Japan's Nikkei Stock Average slipped 0.2%, and China's Shanghai Composite ticked up 0.1%, as investors awaited Chinese trade data due over the weekend.

Crude-oil futures slipped 0.2% to $91.86 a barrel, while gold futures fell 0.6% to $1,758 an ounce. For the week, gold lost 1.2%, its worst weekly performance since early July. The dollar lost ground against the euro and the yen. Treasurys rose, sending the yield on the benchmark 10-year note down to 1.663%.

In other corporate news, Advanced Micro Devices Inc. (>> Advanced Micro Devices, Inc.) declined 14%, making it the biggest decliner among the S&P 500 stocks, after the semiconductor maker slashed its third-quarter revenue outlook, citing weak overall demand caused by challenging macroeconomic conditions, and cut its gross margin forecast as a result of inventory write downs.

J.B. Hunt Transport Services Inc. (>> J.B. Hunt Transport Services, Inc.) gained 6.5% after reporting third-quarter revenue that beat expectations, though earnings fell a bit shy of estimates.

U.S.-listed shares of Aeterna Zentaris Inc. (AEZS, AEZ.T) tumbled 22% after the drug-development company said it launched a public offering of common stock and warrants to purchase common shares.

IGate Corp. (>> iGATE Corporation) advanced 1% after the technology consulting company reported third-quarter earnings that were well above expectations, offsetting a slight shortfall in revenue.

Ecolab Inc. (>> Ecolab Inc.) rose 4% after it agreed to buy privately held specialty chemical company Champion Technologies in a deal valued at $2.2 billion, in cash and stock. The water technologies company also raised its third-quarter earnings outlook.

Workday Inc. (>> WORKDAY) soared 74% on its debut at the New York Stock Exchange. Shares in the business-software company were priced at $28, well above its expected range and raising $637 million in the biggest initial public offering from a tech company since Facebook's weak May debut.

Write to Jonathan Cheng at jonathan.cheng@wsj.com

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