Stocks fluctuate in morning trading as Morgan Stanley results fall short of expectations

Mixed earnings reports weigh Wall Street

NEW YORK — Investors unnerved by mixed news from corporate earnings reports sent stocks mostly lower in early trading Wednesday.

The overall market fluctuated and bank stocks fell after Morgan Stanley reported a wider-than-expected loss for the first quarter and reduced its dividend. The results overshadowed more upbeat reports from AT&T Inc., Boeing Co. and McDonald’s Corp.

Morgan’s report was important because it interrupted a string of better-than-expected results from banks that suggested some of their problems were easing. Banks have largely dictated the stock market’s direction since the fall of Lehman Brothers Holdings Inc. in mid-September. Analysts say it’s crucial that banks become more stable and resume normal levels of lending in order for the economy to recover.

The market tumbled Monday on bank worries and then recovered about half its losses Tuesday after Treasury Secretary Timothy Geithner reassured investors about the health of banks’ balance sheets. But mixed corporate reports have otherwise driven trading.

In midmorning trading, the Dow Jones industrial average fell 26.84, or 0.3 percent, to 7,942.72.

Broader stock indicators were mixed. The Standard & Poor’s 500 index fell 2.63, or 0.3 percent, to 847.45, and the Nasdaq composite index rose 7.37, or 0.5 percent, to 1,651.22.

About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 179.1 million shares.

Morgan Stanley fell $1.86, or 7.6 percent, to $22.79 after reporting it lost $578 million. The company said it was hurt in part by a deteriorating commercial real estate market. The bank’s loss to common shareholders totaled 57 cents per share for the January to March period. That was wider than the per-share loss of 8 cents analysts had expected.

AT&T said strong results from its wireless business softened the effect of the weak economy and helped the country’s biggest telecommunications carrier beat analyst estimates for the first quarter. The stock rose 73 cents, or 2.9 percent, to $26.01.

McDonald’s rose 81 cents to $56.08 after saying its first-quarter profit climbed nearly 4 percent. Earnings of 87 cents per share topped the 82 cents per share figure Wall Street had been expected.

Wells Fargo & Co., which bought Wachovia last fall at the height of the credit crisis, said it earned $2.38 billion. That compares with a profit of $2 billion a year earlier. Wells rose 14 cents to $18.95.

Boeing Co. said its first-quarter earnings fell 50 percent, partly because of planned production cuts as airlines postpone deliveries of new planes. The world’s second-largest plane maker also lowered its forecast for the year. The stock rose 40 cents to $37.05.

Continental Airlines Inc. slipped 7 cents to $14.93 after reporting it lost $136 million in the first quarter as traffic fell and business travelers saved money by moving from first-class to the coach cabin.

Yahoo Inc. rose 86 cents, or 6 percent, to $15.24 after saying it would lay off nearly 700 workers. The company’s earnings fell 78 percent to $118 million for the first three months of the year.

In other trading, the Russell 2000 index of smaller companies fell 2.58, or 0.6 percent, to 467.47.

Bond prices were little changed. The yield on the benchmark 10-year Treasury was flat at 2.90 percent from late Tuesday. Bond prices move opposite to yields. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.14 percent from 0.13 percent Tuesday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 7 cents to $48.48 a barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average rose 0.18 percent. In afternoon trading, Britain’s FTSE 100 fell 0.5 percent, Germany’s DAX index fell 0.1 percent, and France’s CAC-40 fell 0.5 percent.