Dow goes negative for 2010 as sellers swarm

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Wall Street’s slump today wiped out the last of the Dow Jones industrial average’s year-to-date gain -- and fueled fresh expectations that the market finally was on the verge of a significant decline.

And yes, you’ve heard the latter line before.

The 30-stock Dow ended down 213.27 points, or 2%, at 10,389.88, the biggest one-day drop since Oct. 30. The sell-off left the Dow off 0.4% for the year. As of Tuesday, the index had been up 2.8% for the year.

Some broader indexes are clinging to 2010 gains. The Standard & Poor’s 500, off 1.9% to 1,116.48 today, is up 0.1% for the year. The Russell 2,000 small-stock index still is up 0.5% for the year after losing 1.8% today.

The Dow was slammed by heavy losses in its big-bank shares, including JPMorgan Chase and Bank of America, after President Obama proposed limiting the size of the megabanks and restricting their ability to engage in securities trading for their own accounts. JPMorgan slid $2.86, or 6.6%, to $40.54; Bank of America fell $1.02, or 6.2%, to $15.47.

But most of the market’s biggest losers today were commodity-related stocks, apparently reacting to worries about China’s plans to restrain bank lending and slow its economy.

Of the 10 major stock sectors in the S&P 500, the commodities sector sank 4.3% for the day, compared with a 3% decline for the financial sector. All 10 sectors were down in active trading.

Caterpillar, the maker of earth-moving equipment and a favorite way to bet on China, fell 4.9% to $56.85. Its loss accounted for 22 Dow points.

Some traders said market players have had their finger on the sell trigger since stocks hit 15-month highs on Tuesday. Today, Obama and China provided convenient excuses to pull back. Some analysts also pointed to fourth-quarter corporate earnings reports that haven’t shown the significantly better-than-expected numbers the bulls had hoped for.

After the market closed, Google reported fourth-quarter sales that missed some estimates. The stock tumbled to $557 after hours after rising $2.57 to $582.98 in regular trading.

For the last 10 months, as stocks have rallied with only minor interruptions, even the bulls have warned that at some point a “correction” would hit -- meaning a drop of at least 10% in major indexes.

Is this finally it? The market’s two-day slide has pulled the Dow down 3.1% from Tuesday’s 15-month high. The S&P is off 2.9% and the Russell 2,000 is down 3.2%. If this is the correction, it’s still early.

Joe Saluzzi, veteran trader at Themis Trading in Chatham, N.J., said he believed that “the bulls still have control of the market. I think they’re going to try to buy the dip.”

Barry Ritholtz, head of market research firm FusionIQ in New York, also said he doubted that the market rally had peaked.

A pullback at this point “would likely create more pessimism and fear and then create one last leg up that would create the overconfidence associated with a top or a very long and protracted trading range,” he said.

They both think too many people are looking for a correction, and therefore that the market won’t give the crowd what it wants.

But it’s also true that the crowd sometimes gets it right.

-- Tom Petruno