U.S. stocks and exchange traded funds (ETFs) are in negative territory this morning giving back some of the gains seen in yesterday’s rally.
More than half of the banks that underwent federal government stress tests will be required to raise more capital to meet buffer requirements to protect any future losses. This indicates that the recession is still prevailing and is deeper and longer than previously expected, states Sara Lepro of the Associated Press. The exact roster of banks that will need additional capital is still ambiguous, but the detailed results should be made public later this week. This news sent the Financial Select SPDR (XLF), down about 1% in morning trading.

On a positive note, the Institute for Supply Chain Management said that the U.S. service sector contracted, but at a slower pace than expected.

Drugstore operator CVS Caremark (CVS) beat Wall Street’s expectations by one penny, reporting earnings of $0.55/share. The outperformance was attributed to increased revenues of prescriptions and discretionary items. To keep the ball rolling, Kraft Foods (KFT) beat analysts’ expectations by reporting revenues of $0.45/share for the first quarter. This performance was fueled by double digit revenue growth from its famous Oreo and macaroni and cheese brands. Analysts expected profits of $0.40/share.

The aforementioned news sent the consumer staples sector in positive territory this morning. The Consumer Staple Select SPDR (XLP), was up nearly 0.3% in intraday trading, despite being down 5.5% for the year; KFT is 3.8%.

Federal Reserve Chairman Ben Bernanke addressed Capitol Hill today to discuss the economy.  He stated that we should be pulling out of the recession and see growth again later this year. But he warned that despite growth, activity could still be subpar.

The Dow Jones Industrial Average gave back nearly 0.3%, the S&P 500 declined by 0.2% and the Nasdaq dropped 0.6%.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.