Stocks close lower in bumpy trading as banks worries continue

NEW YORK -- Nagging worries about banks upended a stock market rally Wednesday.

A late-session drop in banks left Wall Street's major benchmarks mixed. The Dow Jones industrial average fell 83 points, while the technology-heavy Nasdaq composite index ended modestly higher ahead of a quarterly report from eBay and following earnings from Yahoo.

Banks had tumbled on Monday after Bank of America warned of further loan losses, only to jump back on Tuesday after Treasury Secretary Timothy Geithner told Congress that most banks were well-capitalized.

"We're starting to see a little light at the end of the tunnel," said Frank Ingarra, co-portfolio manager at Hennessy Funds. "The challenge is I don't know how long the tunnel is."

The Dow fell 82.99, or 1%, to 7,886.57.

Broader market measures were mixed. The Standard & Poor's 500 index fell 6.53, or 0.8%, to 843.55, while the Nasdaq composite index rose 2.27, or 0.1%, to 1,646.12.

Anton Schutz, portfolio manager of Burnham Financial Industries Fund and Burnham Financial Services Fund, said with bank earnings mostly in hand investors are now focused on the results of the government's "stress tests," which are aimed at determining whether banks will need more government bailout money.

Schutz said the late slide in bank stocks Wednesday reflects fear over what those details might reveal about the industry. Results from the tests are due to be released May 4.

Morgan Stanley fell $2.21, or 9%, to $22.44 after reporting it lost $578 million and reduced its dividend. The company said it was hurt in part by a deteriorating commercial real estate market.