Stocks erase gains as JPMorgan slips

NEW YORK (CNNMoney) — U.S. stocks erased early gains Wednesday afternoon as investors weighed JPMorgan Chase’s solid quarterly profit against the bank’s downbeat comments.

With three hours left in the session, the Dow Jones industrial average (INDU) was down 28 points, or 0.2% and the S&P 500 (SPX) fell 4 points, or 0.3%. The Nasdaq (COMP) remained in positive territory, but was only up 3 points, or 0.1%.

“There are still a lot of unknowns that are keeping the market stuck in a tight trading range,” said Paul Mendelsohn, president and chief investment strategist at Windham Financail Services.

Investors initially cheered better than-expected profit and revenue figures from JPMorgan Chase (JPM, Fortune 500), the first major bank to report first-quarter results.

But the enthusiasm was tempered by JPMorgan CEO Jamie Dimon’s comments that mortgage-related losses would continue for some time, and a warning that investors should not expect additional dividend increases beyond the 25 cents set for this quarter. Shares of the bank slid more than 1% following the comments.

“Investors are focusing on earnings, but what they’re really looking for is a positive outlook for the future,” said Paul Mendelsohn, president and chief investment strategist at Windham Financail Services. “We want to see companies beat expectations, but if they keep adding a ‘but’ clause, that will put a lid on the market.”

Other bank stocks that had been up earlier in the session also turned lower, with Bank of America (BAC, Fortune 500) falling more than 1%. Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500) were also under pressure.

Mendelsohn added that investors are also going to be cautious as they await President Obama’s speech on his long-term deficit reduction plan set for Wednesday afternoon.

“The government only has a few weeks before lawmakers have to debate to raise the debt ceiling, but investors are afraid that there could be a deadlock,” Mendelsohn said. “They’ll put some protections in place instead of waiting to see how how this game will play out.”

U.S. stocks finished lower Tuesday, with all three major indexes losing about 1%, as a 3% drop in oil prices sparked a sell-off in energy stocks, and Alcoa’s sales disappointment weighed down the Dow.

Economy: Economists are continuing to scan the latest data for the domino effect of rising prices on other areas of the economy.

Before the market opened, the government reported retail sales rose 0.4% in March. The number was slightly below forecasts. Stripping out gas, retail sales were only up 0.1% for the month.

“Clearly, higher commodity prices are factoring into higher retail sales,” said Aichi Amemiya, economist with Nomura Securities.

Retail sales for the prior two months were revised significantly higher — causing Nomura to raise its daily revised estimates for first-quarter growth to 2.3%, from 2.1% before.

A separate government report showed that business inventories rose 0.5% in February, slightly below forecasts.

In the afternoon, the Federal Reserve will release its Beige Book. The report is a collection of regional observations on the U.S. economy by the Federal Reserve’s 12 regional banks.

Companies: Shares of Tyco International (TYC) fell 1.8%, after French company Schneider Electric denied reports that it is trying to buy the Swiss manufacturing conglomerate for $30 billion.

World markets: European stocks ended higher. Britain’s FTSE 100 and France’s CAC 40 rose 0.8%, while the DAX in Germany added 1.1%.

Asian markets ended higher. The Shanghai Composite rose just under 1%, the Hang Seng in Hong Kong added 0.7% and Japan’s Nikkei rose 0.9%.

Currencies and commodities: The dollar fell against the euro and the British pound, but rose against the Japanese yen.

Oil for May delivery fell 65 cents to $105.60 a barrel.

Gold futures for June delivery fell 60 cents to $1,453 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 3.48% from 3.50% late Tuesday.  

First Published: April 13, 2011: 9:45 AM ET