* Large drop in wholesalers inventory sparks caution
* Analyst Bove's comments, downgrades hurt banking shares
* Fed kicks off two-day monetary policy meeting
* Stocks down; S&P 1.32 pct, Dow 1.11 pct, Nasdaq 1.39 pct
* For up-to-the-minute market news click []
(Updates to late morning, changes quote)
By Angela Moon
NEW YORK, Aug 11 (Reuters) - U.S. stocks slid more than 1
percent on Tuesday after an unexpectedly large drop in
inventories at wholesalers raised doubts about an economic
recovery and bank shares skidded after a prominent analyst
warned that fundamentals for the industry have not improved.
The sharp drop in inventories in June, which was nearly
double expectations, suggests that businesses remained
skeptical about a return in demand. For details see:
[]
"There has been a lot of discussion that we are building a
base for inventory rebuild but (today's number) suggests that
we are a bit off on the recovery that some people had been
anticipating," said Peter Jankovskis, co-chief investment
officer at OakBrook Investments LLC in Lisle, Illinois.
Jankovskis said the market also was "definitely seeing a
pullback" after the recent rally that sent the broader S&P
index to a 10-month high last week and up nearly 50 percent
from a closing-low set on March 9.
Financial stocks were major underperformers, tumbling after
Rochdale Securities analyst Richard Bove painted a gloomy
outlook for the banking industry. He said bank stocks are
trading on "fumes," and he expects a short-term pull-back in
the stock prices after a recent rise. For details, see
[].
The Dow Jones industrial average <> was down 103.99
points, or 1.11 percent, at 9,233.96. The Standard & Poor's 500
Index <.SPX> was down 13.34 points, or 1.32 percent, at 993.76.
The Nasdaq Composite Index <> was down 27.67 points, or
1.39 percent, at 1,964.57.
Among banking stocks, Bank of America<BAC.N> was down 4.14
percent to $15.99 and JP MorganChase <JPM.N> was down 3.54
percent to $41.19.
The S&P Regional Banks sub-index <.GSPBNKS> was off 5.09
percent, while the KBW Bank Index <.BKX> was down 4.83
percent.
Also hurting financials, Miller Tabak cut its price targets
on Zions Bancorp <ZION.O> and Regions Financial Corp <RF.N>.
Shares of Zions dropped more than 10 percent to $16.10, while
Regions dropped 5.43 percent to $4.70.
CIT Group Inc <CIT.N> added to losses for the financial
sector, plunging 22 percent to $1.15 after the 101-year-old
lender said it would file for bankruptcy protection if it
failed to complete its debt tender or arrange other financing.
(For details, see [])
The negative news offset better-than-expected data on U.S.
non-farm productivity in the second quarter, which showed
worker productivity rose at the fastest pace in six years as
hours worked fell much more steeply than output.
Investors are closely eyeing the two-day monetary policy
meeting by the U.S. Federal Reserve that kicks off on Tuesday.
While interest rates are likely to remain at current levels,
the focus will be on signs of an exit strategy from the Fed's
quantitative easing policy.
(Additional reporting by Chuck Mikolajczak; Editing by Leslie
Adler)
