Stocks zigzag as worries about CIT hit financials

NEW YORK — Unease about financial companies sidelined the stock market’s three-day rally.

Investors found little reason to buy stocks Thursday after a huge rally this week and as they worried about the fate of small business lender CIT Group Inc. Major stock indicators were mixed but in a tight range.

Analysts said some pause was to be expected after the Dow Jones industrial average surged 470 points, or 5.9 percent, since the start of the week. Weakness in financial stocks disrupted the market’s occasional advances.

Investors are worried that CIT could file for bankruptcy after the company said late Wednesday that negotiations with federal regulators about a rescue broke off. CIT’s shares tumbled about 70 percent, and also weighed on other financial shares.

Banking stocks received little benefit from a stronger profit report from JPMorgan Chase & Co., which reported big gains in its investment banking business, held back somewhat by loan losses. Also weighing on the market was a poor indicator on regional manufacturing conditions from the Philadelphia Federal Reserve.

“A lot of the good news has been priced in and the market really needs to see more evidence that there is strong momentum in the financials,” said Nick Kalivas, vice president of financial research at MF Global.

The jump in stocks this week marked a turnaround from a month in which stocks drifted lower as investors worried that a huge rally in March and April on hopes for an economic recovery had gone too far. This week’s earnings reports have given investors some of the confirmation that the economy isn’t as bad as feared, but they still want to see more evidence of a turnaround.

In early afternoon trading, the Dow Jones industrial average fell 6.87, or less than 0.1 percent, to 8,609.34. The Standard & Poor’s 500 index fell 2.49, or 0.3 percent, to 930.19, while the tech-heavy Nasdaq composite index rose 2.32, or 0.1 percent, to 1,865.22.

Meanwhile, bond prices jumped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.53 percent from 3.62 percent late Wednesday.

CIT tumbled $1.17, or 71 percent, to 47 cents. Meanwhile, the KBW Bank Index, which tracks 24 of the nation’s largest banks, fell 1.3 percent.

Better news on jobs and corporate earnings wasn’t enough to lift stocks. The Labor Department said new claims for unemployment insurance plunged last week by 47,000 to 522,000, the lowest level since early January. Economists polled by Thomson Reuters predicted an increase to 575,000.

The improved data, however, may have been affected by the timing of automobile plant shutdowns. Eric Thorne, an investment adviser at Bryn Mawr Trust Co. said the figures were “skewed.”

JPMorgan said Thursday it generated record revenue, spurred on by strong investment banking operations. Its results come two days after Goldman Sachs Group Inc. also topped expectations with much stronger results in underwriting and trading. JPMorgan slipped 46 cents to $35.80.

Strong earnings from the banks have encouraged investors about the economy. The results also show that many of the nation’s biggest banks have quickly recovered from the collapse of credit markets last fall that led to the failure of Lehman Brothers and near collapse of American International Group Inc.

Thursday brings more earnings reports that could provide additional signs into how the economy is faring. Internet powerhouse Google Inc. and computer maker International Business Machines Corp. both report earnings after the market closes.

In other trading, the dollar fell against other currencies. Gold prices fell.

Light, sweet crude fell 74 cents to $60.80 a barrel on the New York Mercantile Exchange.

Advancing stocks narrowly outnumbered decliners on the New York Stock Exchange, where volume came to 522.6 million shares, compared with 548.3 million shares traded at the same point Wednesday.

The Russell 2000 index of smaller companies fell 0.56, or 0.1 percent, to 515.08.

Overseas, Britain’s FTSE 100 rose 0.4 percent, Germany’s DAX index rose 0.6 percent, and France’s CAC-40 gained 0.9 percent. Japan’s Nikkei stock average rose 0.8 percent.