• Midweek Slump: Stocks tumble through Wednesday.
• Mixed Earnings: IBM falls, but banks rise after results.
• Housing Update: Housing starts fall, but permits rise.
• Author, Author: Amazon launches new royalty program.

The Lowdown

A boost in financials wasn t enough to stop broader selling Wednesday. Economic data and earnings sent mixed signals.

The Dow Jones Industrial Average fell 122 points to 10603. The S&P 500 dropped 12 to 1138, and the Nasdaq edged down 29 to 2291.

Some selling pressure came out of China on Wednesday. "They are supposed to lead us out of the recession, and now that they re talking about cutting back, it makes people nervous." says Doug Roberts, chief investment strategist at ChannelCapitalResearch.com. "There s almost a fear that governments may be starting to pull back not just ours, but around the world."

Nervousness and some worries that the recovery may take more of a U shape than a V shape have prompted people to take a few chips off the table, Roberts says. But there are still a slew of major earnings reports to go and a batch of economic data left in the week. It s early, he says.

IBM (IBM) weighed on the Dow, losing as much as 3% a day after it topped earnings estimates and raised guidance. Investors were disappointed in the top line.

Financials were mostly higher, with the KBW Bank index rising 1.4%, after a mixed batch of bank earnings. Morgan Stanley (MS) was trading lower after a miss. But Bank of America (BAC), Bank of New York Mellon (BK) and Wells Fargo (WFC) all traded higher after posting quarterly results. Bank of America reported a narrowed but disappointing loss. The bank's credit losses also rose to $10.11 billion, up from $8.53 billion a year earlier. Meanwhile, Wells Fargo reported a profit of $2.82 billion, or 8 cents a share, up from a year-earlier loss of 84 cents. Analysts had forecast a loss of a penny a share on $22 billion in revenue.

Economic data were lukewarm. Housing starts fell by more than expected to 557,000 in December, down from 580,000 the month prior. But building permits rose by more than expected to 653,000, up from 589,000 and well above estimates.

The Philadelphia Fed index and weekly data on jobless claims are due out later in the week.

Stocks overseas were lower. In Europe, the FTSE in London and Dax in Frankfurt lost 1.7% and 2.1%, respectively. In Asia, the Nikkei in Japan fell 0.3%, while the Hang Seng in Hong Kong gave up 1.8%.

Corporate News

• AIG (AIG) is in final negotiations to sell a large international life-insurance unit to MetLife for $14 billion to $15 billion, The Wall Street Journal reported citing anonymous sources.
• Amazon (AMZN) announced a new royalty option that allows those using the company's ereader platform to earn more for each book sold.