U.S. banks were the S&P 500′s worst performing sector.
Investors feared that weak euro zone growth would hamper
countries dealing with heavy debt loads and the banks exposed to
those debts.

“We’re very concerned around the markedly deteriorating
credit fundamentals in Europe,” said Steven Baffico, chief
executive officer at Four Wood Capital Partners in New York.

Data showing weakness in the euro zone services and
manufacturing sectors overshadowed the day-old deal to bail out
Greece.

After touching a near 7-month high on Tuesday, the KBW bank
index fell 2 percent. A key European bank index
declined 2.5 percent.

The S&P 500 index failed again to hold above 1,360, the high
reached last May and a key resistance point that could spark
further gains if broken. The benchmark index is up about 8
percent for the year and gained more than 20 percent from its
October lows.

The Dow Jones industrial average lost 27.02 points,
or 0.21 percent, to 12,938.67. The S&P 500 Index dropped
4.55 points, or 0.33 percent, to 1,357.66. The Nasdaq Composite
fell 15.40 points, or 0.52 percent, to 2,933.17.

Oil services companies rose, partly offsetting the decline
by banks. Drilling contractor Nabors Industries rose 7
percent to $21.78 a day after its operating results topped Wall
Street expectations and as the chief executive detailed a
retooling of the company.

The PHLX oil services sector index rose 1.7 percent.

Home builder stocks fell, with the PHLX housing sector index
down 1.4 percent. Data showed U.S. home resales surged to
a 1-1/2 year high in January but came in below forecasts.

Dell Inc was one of the biggest drags on the S&P,
tumbling 5.8 percent to $17.10 in volume 2.5 times above its
recent daily average. The world’s No. 3 personal computer maker
forecast revenue below expectations late Tuesday. The NYSEArca
computer hardware index lost 1.8 percent.

After the market’s close, shares of computer maker
Hewlett-Packard fell 1.4 percent after reporting
quarterly revenue below expectations.

About 6.3 billion shares changed hands on the New York Stock
Exchange, the Nasdaq and Amex, compared with last year’s daily
average of about 7.8 billion shares.

Slightly more than three shares fell for every two that rose
on the NYSE, while on the Nasdaq more than two fell for every
advancing issue.

According to Thomson Reuters data through Wednesday morning,
of the 424 companies in the S&P 500 that have reported earnings,
64 percent have topped analysts’ expectations, which is below
the 70 percent beat rate for the past four quarters but above
the median of 62 percent since 1994.

Bank shares were the biggest decliners due to U.S. banks’
exposure to Europe. The KBW bank index fell 1.8 percent.

Oil services companies rose, nearly offsetting the decline
from banks. Nabors Industries’ shares rose 7.4 percent
to $21.87 a day after its operating results topped Wall Street
expectations.

In addition, the chief executive of Nabors, owner of the
world’s largest land-drilling fleet, said he would realign the
company to improve its returns. The PHLX oil
services sector index rose 2 percent.

The S&P 500 index has failed hold above 1,360, a high hit
last May and a key resistance point that could spark further
gains, if broken. The benchmark index is up about 8 percent for
the year and gained more than 20 percent from its October lows.

Fears that the euro zone may tip into recession followed
data showing weakness in the services and manufacturing sectors,
which tempered optimism after a deal was reached to bail out
Greece.

The slowing business activity was echoed in China where
data showed export orders fell in their worst performance in
eight months.

“We had some modestly weak data from Europe and China, but
today is mostly just another day of churning as we sit close to
that key level of 1,360 on the S&P,” said Jack DeGan, chief
investment officer at Harbor Advisory Corp in Portsmouth, New
Hampshire.

“There is definitely a technical effect on the market and
today’s selling is related to that. If we punch through the
level and stay above, the market could definitely move higher.”

The Dow Jones industrial average dipped 7.57 points,
or 0.06 percent, to 12,958.12. The S&P 500 Index fell
1.84 points, or 0.14 percent, to 1,360.37. The Nasdaq Composite
lost 7.30 points, or 0.25 percent, to 2,941.27.

Dell Inc slumped 6.1 percent to $17.10 and was one
of the biggest drags on the S&P. The world’s No. 3 personal
computer maker forecast revenue below expectations late Tuesday.
The NYSEArca computer hardware index lost 1.5 percent.

Fellow computer maker Hewlett-Packard Co is set to
report earnings on Wednesday. The market expects a profit of 87
cents per share, down from $1.36 one year ago.

According to Thomson Reuters data through Wednesday morning,
of the 424 companies in the S&P 500 that have reported earnings,
64 percent have topped analysts’ expectations, which is below
the average for the past four quarters.

Equity indexes continued to trade in tight ranges, with the
S&P 500 facing strong resistance in the 1,355-1,360 area.

U.S. labor, manufacturing and housing data suggested
sustained momentum in those key economic sectors and hinted the
recovery continues at a steady pace.

“We’re getting this incredible flow of good data,” said Jim
Paulsen, chief investment officer at Wells Capital Management in
Minneapolis. “It’s hard not to want to step into the market.”

Greece expects to get approval on Monday from euro zone
finance ministers to begin a debt swap with private bondholders,
the spokesman for the Greek government said, moving closer to
averting a disorderly default by Athens.

“People are increasingly of the opinion that although Europe
will continue to have flare-ups, it’s not likely to become a
calamity for the world economy,” Paulsen said.

The Dow Jones industrial average added 118.29 points,
or 0.93 percent, to 12,899.24. The S&P 500 Index gained
13.29 points, or 0.99 percent, to 1,356.52. The Nasdaq Composite
rose 36.77 points, or 1.26 percent, to 2,952.60.

The S&P hit its highest level since May while the Nasdaq
traded near its highest since December 2000 and the Dow was near
a four-year high.

Bank shares rose, brushing off a warning from Moody’s about
possible downgrades to the credit ratings of 17 global and 114
European financial institutions.

Among the ratings threatened were those of Goldman Sachs
, up 1.5 percent at $114.82, and Bank of America,
up 3.2 percent at $8.03.

The KBW bank index rose 1.8 percent.

Apple shares, which largely dictated the direction
of Wednesday’s stock market, reversed early losses to trade up
1.2 percent at $503.

Trading in Apple topped 24 million shares, above its 19.5
million average in the past 10 days.

According to a Chinese newspaper website, some cities in
China have asked retailers to take Apple iPad tablets off
shelves in connection with a legal battle between a Chinese
technology firm and Apple over trademark issues.

Equity indexes continued to trade in tight ranges, with the
S&P 500 near a nine-month high.

U.S. labor, manufacturing and housing data suggested
sustained momentum in the key economic sectors and confirmed the
recovery continues at steady pace.

“We’re getting this incredible flow of good data,” said Jim
Paulsen, chief investment officer at Wells Capital Management in
Minneapolis. “It’s hard not to want to step into the market.”

The euro zone is putting the finishing touches to a second
bailout deal for Athens that could be approved on Monday,
officials said, moving closer to averting a disorderly default
by Greece.

“People are increasingly of the opinion that although Europe
will continue to have flare-ups, it’s not likely to become a
calamity for the world economy,’ Paulsen said.

The Dow Jones industrial average added 109.13 points,
or 0.85 percent, to 12,890.08. The S&P 500 Index gained
10.52 points, or 0.78 percent, to 1,353.75. The Nasdaq Composite
rose 26.00 points, or 0.89 percent, to 2,941.83.

Bank shares rose, brushing off a warning from Moody’s about
possible downgrades to the credit ratings of 17 global and 114
European financial institutions.

Among the ratings threatened were those of Goldman Sachs
, up 1.2 percent at $114.50, and Bank of America,
up 2.8 percent at $8.

The KBW bank index rose 1.7 percent.

Apple shares, which largely dictated the direction
of Wednesday’s stock market, were off 1.1 percent at $492.24.

Trading in Apple topped 17 million shares at midday, above
its 15.4 million average in the last 25 days.

According to a Chinese newspaper website, some cities have
asked retailers to take Apple iPad tablets off shelves after a
legal battle between a Chinese technology firm and Apple over
trademark issues.

Apple Inc shares turned negative, weighing on the
Nasdaq and reversing the overall market’s advance. Doreen
Mogavero, chief executive of trading firm Mogavero, Lee & Co,
said from the floor of the New York Stock Exchange investors
were concerned about a report that Apple had asked Amazon to
halt sales of its iPad in China.

Apple was not immediately available for comment, and an
Amazon spokeswoman declined to comment.

Volume on the iPhone maker’s shares was more than twice its
average in the last 10 days. Shares were last down 0.4 percent
at $507.35 after climbing as high as $526.29.

Industrial stocks led declines on the S&P 500, with Deere &
Co down 3.6 percent at $85.85 after investors expected
the farm equipment company to give a stronger full-year
forecast.

U.S. manufacturing output rose solidly in January and a
gauge of factory activity in New York state hit a 1-1/2-year
high in February, adding to a run of fairly upbeat data, even
though overall industrial production was flat last month.

The S&P hit a peak of 1,355.87, just shy of its July 2010
high. A break above that level would take the benchmark to its
strongest since at least May of last year.

“Right now we’re bouncing off 1,355. It’s probably a little
consolidation what we’re having right now,” said Randy
Frederick, managing director of active trading and derivatives
at Charles Schwab.

The Dow Jones industrial average dropped 105.58
points, or 0.82 percent, to 12,772.70. The S&P 500 Index
fell 6.32 points, or 0.47 percent, to 1,344.18. The Nasdaq
Composite lost 8.04 points, or 0.27 percent, to
2,923.79.

Decliners on the Dow, which underperformed the broader
market, included industrial and material stocks like Caterpillar
Inc, down 0.7 percent at $113.66.

Earlier the Dow industrials were trading near a 3 1/2 high
and the Nasdaq was at a more than 11-year high.

Also weighing on the market, European Union sources said
finance officials were examining ways of delaying parts or even
all of a second bailout for Greece, while still avoiding a
disorderly default. That rekindled fears about the region’s debt
crisis.

A debt-laden Chinese technology firm seeking to ban all iPad
shipments in and out of the country has been told that China’s
customs authorities are unlikely to intervene in the trademark
battle.

The weaker-than-expected gain in January retail sales was
due in part to discounting in auto sales, but a rebound in an
underlying measure of sales underscored the U.S. economic
recovery’s strength.

The S&P retail index edged up 0.2 percent to its
highest on record.

Bank shares fell before a meeting of euro zone finance
ministers on Wednesday to decide on a 130 billion
euros bailout for Greece to avert a chaotic default.

“Greece is still very unsettled, and it makes perfect sense
people are taking money out of financials,” said Ken Polcari,
managing director at ICAP Equities in New York, citing
nervousness about the outcome of Wednesday’s meeting.

On Monday, the S&P 500 rose near a seven-month high and was
up more than 25 percent from a low in early October. The
benchmark index has encountered strong resistance in the
1,355-1,360 area.

“The market is not falling apart. People are just taking
some money off the table,” Polcari said.

Financials led declines on the S&P 500 with a 1.2
percent drop but are up 11 percent this year. Bank of America
shares fell 2.5 percent to $8.04 but have risen nearly
45 percent this year.

Basic materials shares, up almost 10 percent so far
in 2012, were down 1 percent.

The Dow Jones industrial average fell 31.49 points,
or 0.24 percent, to 12,842.55. The S&P 500 Index lost
5.05 points, or 0.37 percent, to 1,346.72. The Nasdaq Composite
dropped 13.28 points, or 0.45 percent, to 2,918.11.

Micron Technology shares rose 5.9 percent to $8.31
after positive comments from analysts at JPMorgan and
Oppenheimer. The stock is up 32 percent this year.

Moody’s Investors Service put Britain’s Aaa credit rating in
jeopardy for the first time late on Monday. The agency also cut
its outlook on the top-tier ratings of France and Austria and
downgraded the ratings of six euro-zone nations, including Spain
and Italy.

Data from Germany suggested Europe’s bulwark economy is
picking up its pace. The ZEW economic think tank’s monthly poll
of economic sentiment jumped to 5.4 from minus 21.6 in January,
well above the consensus forecast in a Reuters poll of analysts.

Apple plans to announce a new version of its iPad
in the first week of March, a Wall Street Journal report said,
citing a person briefed on the matter. Apple
shares rose slightly to $503.33 after closing above $500 for the
first time on Monday.

Moody’s move was less aggressive than rival agency Standard & Poor’s, but its action puts London’s prized top credit rating in jeopardy for the first time.

It said it was worried about Europe’s ability to undertake the reforms needed to address the crisis and the amount of funds available to fight it. It also said the region’s weak economy could undermine austerity drives by governments to fix their finances.

The euro and sterling fell after the announcement, with pound falling 0.4 percent to $1.5703 and the single currency dipping 0.3 percent to $1.3154. European and U.S. equity index futures were also lower.

The U.S. rating agency said it changed the outlooks for the ratings of France, Britain and Austria to negative due to “a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns’ balance sheets”.

Germany’s top-tier rating was described as “appropriate” by Moody’s, and it affirmed the triple-A rating on the euro zone’s bailout fund, the European Financial Stability Fund (EFSF).

Moody’s, which said late last year it was reconsidering its European ratings, cut the ratings of Italy, Portugal, Slovakia, Slovenia and Malta by one notch. It downgraded Spain by two notches.

Moody’s said the scope of the downgrades was limited due to “the European authorities’ commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence”.

The announcement came a day after Greece’s parliament approved a deep new round of budget cuts in the hope of securing new bailout funds and avoiding a chaotic default in March.

Bart Oosterveld, managing director at Moody’s sovereign risk group, declined to comment on the state of the negotiations between Athens and its creditors, but said that if Greece were to leave the European Union the impact on financial markets and credit ratings “would be quite profound”.

And he warned that European credit markets may still deteriorate despite efforts by the European Central Bank to ease financing pressures with its three-year refinancing operations.

“The markets are better in the short term but probably not in the longer term,” Oosterveld told Reuters in an interview. “We think the markets remain quite fragile.”

The rating outlooks of the nine countries affected by Moody’s action was set to negative, “given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness”, Moody’s said.

BRITAIN, FRANCE UNDER PRESSURE

Britain’s finance minister responded by saying the country must keep its promise to slash its large budget deficit.

“This is proof that, in the current global situation, Britain cannot waver from dealing with its debts,” Finance Minister George Osborne said. “This is a reality check for anyone who thinks Britain can duck confronting its debts.”

The government in Britain has come under increasing pressure to soften its austerity measures to give a stalling economy room to breathe.

The French government said it would press ahead with its policies to improve competitiveness and growth while reducing the government deficit.

“The government is determined to press ahead with its actions to boost growth and competitiveness, notably the reform of the financing of welfare, of employment and the reduction of public deficits,” Finance Minister Francois Baroin said in a statement.

The precarious state of European sovereign finances was underlined on Monday, when the head if China’s sovereign wealth fund brushed aside an appeal from German Chancellor Angela Merkel to buy European government debt, saying such bonds were “difficult” for long-term investors.

A retreat from European government debt has already been boosting relatively high-yielding Australian and New Zealand debt, as cashed-up Asian sovereign wealth funds and other major bond investors look for safe havens to diversify their holdings.

Reserve Bank of Australia Assistant Governor Guy Debelle said on Tuesday that net purchases of Australian debt by foreigners over the first three quarters of 2011 amounted to more than 3 percent of gross domestic product, markedly larger than Australia’s current account deficit.

“Our discussions with market participants suggest that a sizeable share of recent purchases has been by sovereign asset managers,” said Debelle.

Moody’s move on Monday follows one last month by Standard & Poor’s, which stripped France and Austria of their triple-A status, while Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia were downgraded. S&P also cut the EFSF by one notch.

Also in January, rating agency Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain, indicating there was a 1-in-2 chance of further cuts in the next two years.

(Reporting by Rodrigo Campos in New York, Daniel Flynn in Paris, Matt Falloon in London, Alex Richardson in Singapore and Wayne Cole in Sydney; Editing by Leslie Adler, Andrew Hay and Andre Grenon)

Moving less aggressively than rival agency Standard & Poor’s last month but putting the United Kingdom’s rating in jeopardy for the first time, Moody’s said it was worried about Europe’s ability to undertake the kind of reforms needed to address the crisis and the amount of funds available to fight it.

It also said the region’s weak economy could undermine austerity drives by governments to fix their finances.

The U.S. rating agency said it changed the outlooks for the ratings of France, the UK and Austria to negative due to “a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns’ balance sheets.”

Germany’s top-tier rating was described as “appropriate” by Moody’s And it affirmed the triple-A rating on the euro zone’s bailout fund, the European Financial Stability Fund.

Moody’s, which said late last year it was reconsidering its European ratings, cut by one notch the ratings of Italy, Portugal, Slovakia, Slovenia and Malta and downgraded Spain by two notches.

Moody’s said the scope of the downgrades was limited due to “the European authorities’ commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence.”

The announcement came a day after Greece’s parliament approved a deep new round of budget cuts in the hope of securing new bailout funds and avoiding a chaotic default in March.

The rating outlooks of the nine countries affected by Moody’s action was set to negative, “given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness,” Moody’s said.

The euro and sterling fell after the announcement while U.S. equity markets did not immediately react, with S&P 500 futures down two points in light trading.

The euro was down 0.2 percent at $1.3164.

BRITAIN, FRANCE UNDER PRESSURE

Britain’s finance minister responded by saying the country must keep its promise to slash its large budget deficit.

“This is proof that, in the current global situation, Britain cannot waver from dealing with its debts,” finance minister George Osborne said. “This is a reality check for anyone who thinks Britain can duck confronting its debts.”

The government in Britain has come under increasing pressure to soften its austerity measures to give a stalling economy room to breathe.

The French government said it will press ahead with its policies to improve competitiveness and growth while reducing the government deficit.

“The government is determined to press ahead with its actions to boost growth and competitiveness, notably the reform of the financing of welfare, of employment and the reduction of public deficits,” Finance Minister Francois Baroin said in a statement.

Moody’s move on Monday follows one by Standard & Poor’s last month, when France and Austria lost their triple-A status, while Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia were downgraded. S&P also cut the EFSF by one notch.

Also in January, rating agency Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain, indicating there was a 1-in-2 chance of further cuts in the next two years.

(Reporting by Rodrigo Campos in New York, Daniel Flynn in Paris and Matt Falloon in London; editing by Leslie Adler, Andrew Hay and Andre Grenon)

Moving less aggressively than rival agency Standard & Poor’s
last month but putting the United Kingdom’s rating in jeopardy
for the first time, Moody’s said it was worried about Europe’s
ability to undertake the kind of reforms needed to address the
crisis and the amount of funds available to fight it.

It also said the region’s weak economy could undermine
austerity drives by governments to fix their finances.

The U.S. rating agency said it changed the outlooks for the
ratings of France, the UK and Austria to negative due to “a
number of specific credit pressures that would exacerbate the
susceptibility of these sovereigns’ balance sheets.”

Germany’s top-tier rating was described as “appropriate” by
Moody’s And it affirmed the triple-A rating on the euro zone’s
bailout fund, the European Financial Stability Fund.

Moody’s, which said late last year it was reconsidering its
European ratings, cut by one notch the ratings of Italy,
Portugal, Slovakia, Slovenia and Malta and downgraded Spain by
two notches.

Moody’s said the scope of the downgrades was limited due to
“the European authorities’ commitment to preserving the monetary
union and implementing whatever reforms are needed to restore
market confidence.”

The announcement came a day after Greece’s parliament
approved a deep new round of budget cuts in the hope of securing
new bailout funds and avoiding a chaotic default in March.

The rating outlooks of the nine countries affected by
Moody’s action was set to negative, “given the continuing
uncertainty over financing conditions over the next few quarters
and its corresponding impact on creditworthiness,” Moody’s said.

The euro and sterling fell after the announcement while U.S.
equity markets did not immediately react, with S&P 500 futures
down two points in light trading.

The euro was down 0.2 percent at $1.3164.

BRITAIN, FRANCE UNDER PRESSURE

Britain’s finance minister responded by saying the country
must keep its promise to slash its large budget deficit.

“This is proof that, in the current global situation,
Britain cannot waver from dealing with its debts,” finance
minister George Osborne said. “This is a reality check for
anyone who thinks Britain can duck confronting its debts.”

The government in Britain has come under increasing pressure
to soften its austerity measures to give a stalling economy room
to breathe.

The French government said it will press ahead with its
policies to improve competitiveness and growth while reducing
the government deficit.

“The government is determined to press ahead with its
actions to boost growth and competitiveness, notably the reform
of the financing of welfare, of employment and the reduction of
public deficits,” Finance Minister Francois Baroin said in a
statement.

Moody’s move on Monday follows one by Standard & Poor’s last
month, when France and Austria lost their triple-A status, while
Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia
were downgraded. S&P also cut the EFSF by one notch.

Also in January, rating agency Fitch downgraded the
sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and
Spain, indicating there was a 1-in-2 chance of further cuts in
the next two years.

Apple Inc shares closed above $500 for the first
time after a gain of 1.9 percent, leading the Nasdaq Composite
to close at a more than 11-year high.

Greek lawmakers backed drastic cuts in wages, pensions and
jobs on Sunday as the price of a 130 billion euro ($170 billion)
bailout by the European Union and International Monetary Fund.

But unrest in the streets and a voting rebellion by
lawmakers of the ruling coalition suggested Greece may be on the
brink of massive social unrest, which would make it difficult
for Athens to stick to the rescue terms.

Doug Roberts, chief investment strategist at
ChannelCapitalResearch.com, said there is some skepticism about
whether the Greek public will accept the reforms. But current
market conditions make it hard for money managers to avoid
stocks.

“Mutual fund managers have a herd instinct and if everyone
else is playing the game, with cash yielding zero, they have to
participate,” Roberts said.

The S&P 500 last week hit a 7-month high and is up more than
25 percent from a low in early October, in part on bets the
Greek reforms would pass. The benchmark index is hitting strong
resistance in the 1,355-1,360 area, a possible trigger for a
pullback.

“You have to respect the fact the market has been as strong
as it has been, but we wouldn’t buy into this strength,” said
Bruce McCain, chief investment strategist at Key Private Bank in
Cleveland.

The Dow Jones industrial average gained 72.81 points,
or 0.57 percent, to 12,874.04. The S&P 500 Index gained
9.12 points, or 0.68 percent, to 1,351.76. The Nasdaq Composite
rose 27.51 points, or 0.95 percent, to 2,931.39.

Apple raised the stakes in an intensifying global patent
battle with Samsung Electronics by targeting
Samsung’s latest model that uses Google’s Android
software.

Apple shares rose as high as $503.83 and ended up 1.9
percent to a record close of $502.60. Google rose 1 percent to
$612.20.

Google is expected to win approval from European regulators,
as well as from U.S. antitrust authorities, for its planned
$12.5 billion purchase of Motorola Mobility, according
to people familiar with the matter.

Financial stocks, up 1 percent, were among the best
performers on the S&P 500. Bank of America climbed 2.2
percent to $8.25 and is up almost 50 percent this year. Bank
shares continued to outperform after having posted deep losses
in 2011.

Regeneron Pharmaceuticals Inc jumped 12.3 percent
to $114.65 after the company raised its 2012 sales forecast for
a key eye drug.

As earnings season moves into its final stages, 51 companies
in the S&P 500 are scheduled to report results this week.
According to Thomson Reuters data through Monday, of the 357
companies in the benchmark index that have released results, 64
percent have beaten analyst expectations.

About 5.97 billion shares changed hands on the New York
Stock Exchange, the Nasdaq and Amex, compared with last year’s
daily average of near 7.84 billion shares.

On The NYSE, more than three stocks rose for every one that
fell. On the Nasdaq, slightly more than eight posted gains for
every three decliners.