Stocks can't do 2 in a row
Wall Street abandons attempt to rise for the second session in a row as record oil and gas prices knock out early enthusiasm.
NEW YORK (CNNMoney.com) -- Stocks tumbled Wednesday, erasing gains at the end of an otherwise upbeat session, as record oil and gas prices countered an attempt to rally for a second session in a row.
The Dow Jones industrial average (INDU) lost 0.4%, the broader Standard & Poor's 500 (SPX) index lost 0.9% and the Nasdaq composite (COMP) lost 0.5%.
Stocks rose through the early afternoon as investors continued to applaud the Federal Reserve's plan to restore calm to the credit markets, announced Tuesday. But the advance lost steam late in the session and stocks turned lower as investors mulled record oil and gas prices.
"I think the market is handling itself pretty well, considering that it's managing to hold on to most of yesterday's gains while combating oil at $110 a barrel," said Peter Cardillo, chief market economist at Avalon Partners.
On Tuesday, the Dow jumped almost 417 points - its fourth-biggest one-day point gain ever and the biggest one-day point gain since July 2002. Sparking the advance was the Fed's decision to lend up to $200 billion to banks in an effort to loosen up tight credit markets.
Cardillo said that Tuesday's Fed announcement had sparked a big short-covering rally, and that whether it continues through the end of the week will depend on the economic news, including the Feb. retail sales report due Thurs. morning.
Short covering refers to the process by which traders who sold stocks short to take advantage of a falling market have to buy them back.
Oil prices touched an all-time trading high of $110.20 a barrel before closing short of that. Oil had fallen in the morning after the government's weekly oil inventory report showed a surprise jump in crude supplies. Meanwhile gas prices hit an all-time high.
Also in the news: N.Y. Governor Eliot Spitzer announced his resignation amid allegations that he is connected to an international prostitution ring caught in a federal probe. (Full story).
Company news. After the close, Target (TGT, Fortune 500) said it is in talks with a partner to sell half its credit card receivables for about $4 billion, in a deal that could close as soon as the second quarter of this year.
Thornburg Mortgage (TMA) jumped almost 83% on a Bear Stearns upgrade. The company said that Thornburg's survival is more likely now, following Tuesday's Fed action.
Dow component Caterpillar (CAT, Fortune 500) said late Tuesday that 2008 sales and earnings will top earlier forecasts. The heavy equipment maker also lifted its long-term sales goal, saying its looking for profit to rise between 15% and 20% through 2008. Shares rose 3.6%.
On the downside, Humana (HUM, Fortune 500) sharply cut its first-quarter sales and earnings forecast due to higher prescription drug claims. Shares tumbled 13.7%, recovering from bigger morning losses.
Fitch cut its outlook on fellow healthcare company WellPoint (WLP, Fortune 500) to "negative" from "stable." WellPoint warned early this week that 2008 earnings won't meet forecasts, due to higher medical costs and lower-than-expected subscribers.
Government lenders Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500) could have to issue at least $10 billion in new stock this year to raise money due to the ongoing fallout in the housing market, the Wall Street Journal reported Wednesday. However, Freddie Mac's chief financial officer said that no capital raising has been planned.
Meanwhile, Freddie Mac's CEO, speaking at a conference, said that the housing market is the worst in about a century, according to reports.
JP Morgan downgraded a slew of airlines, saying that record oil prices will cause the companies to face record fuel costs. Companies cited included AMR (AMR, Fortune 500) and Northwest (NWA, Fortune 500), both of which were cut to "underweight" from "overweight." Delta Air Lines (DAL, Fortune 500) and Continental Airlines (CAL, Fortune 500) were cut to "neutral" from "overweight," the AP reported.
And Progenics Pharmaceuticals (PGNX) plunged almost 64% after the company and its partner Wyeth said their constipation drug failed a late-stage trial.
Market breadth was negative. On the New York Stock Exchange, decliners beat advancers three to two on volume of 1.56 billion shares. On the Nasdaq, losers beat winners four to three on volume of 2.12 billion shares.
Other markets. U.S. light crude oil for April delivery rose $1.19 to settle at $109.72 a barrel on the New York Mercantile Exchange, a record close.
COMEX gold for April delivery added $4.50 to $980.50 an ounce.
In currency trading, the dollar fell versus the euro but was off its worst levels of the day after touching a fresh record low against the European currency earlier. The greenback fell versus the yen.
Treasury prices rallied after plunging Tuesday. The advance lowered the yield on the benchmark 10-year note to 3.45% from 3.59% late Tuesday. Bond prices and yields move in opposite directions. 
