Stocks wrestle with jobs and banks

Stocks turn mixed Wednesday, giving up some gains, as investors welcomed a pair of not-as-bad-as-expected jobs reports but were cautious after the recent rally.

The employment reports distracted investors from reports that banks might need billions more in capital to meet the requirements of the regulators conducting so-called stress tests.

The Dow Jones industrial average (INDU) gained 18 points, or 0.2%, roughly 90 minutes into the session. The S&P 500 (SPX) index climbed 3 points, or 0.3%. The Nasdaq composite (COMP) fell 15 points, or 0.9%.

Stocks drifted lower Tuesday as investors retreated after a roughly 8-week advance that saw the S&P 500 jump 34%. The rally followed a rout that left the broad stock index at a more than 12-year low.

Since then, investors have been moving back into the market on indications that the economy is starting to find its footing. Wednesday's two job market reports continued that trend.

Employment: A pair of reports released before the open showed that the pace of unemployment is starting to slow.

Employers in the private sector pared 491,000 jobs from their payrolls in April, after cutting 708,000 jobs in March, according to payroll services firm ADP. Economists surveyed by Briefing.com expected a decline of 645,000.

The number of job cuts announced in April decreased for the third month in a row, according to outplacement firm Challenger, Gray & Christmas Inc. U.S. employers announced 132,590 cuts in April, the lowest number since October, but still 47% more than in the same month a year ago.

The reports raised bets that Friday's bigger non-farm payrolls report from the government will show a slower pace of job losses too. Employers are expected to have cut 620,000 jobs from their payrolls after cutting 663,000 in March. The unemployment rate, generated by a separate survey, is expected to have risen to 8.9% from 8.5% in March.

Stress tests: Investors are gearing up for the release of the government's review of the 19 biggest U.S. banks, expected Thursday afternoon. More than half the banks may have to raise additional capital, according to reports this week.

The government is testing to see that the banks have enough money on hand to withstand a potential bigger downturn in the economy. Bank of America (BAC, Fortune 500) may need to raise an additional $34 billion in order to meet regulators' standard.

Earlier reports said that the Dow component would need to raise around $10 billion. Citigroup (C, Fortune 500) and Wells Fargo (WFC, Fortune 500) have also reportedly been told that they will need to raise more money.

Nonetheless, bank shares rallied, with the KBW Bank (BKX) sector index adding over 5%.

Corporate news: Walt Disney (DIS, Fortune 500) issued quarterly results late Tuesday. The Dow component reported weaker earnings that topped estimates on weaker revenue that missed estimates. Shares jumped more than 9% Wednesday.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note up to 3.16% from 3.15% Tuesday. Treasury prices and yields move in opposite directions.

Borrowing costs continued to improve. The 3-month Libor rate fell to an all-time low of 0.97% from 0.99% Tuesday, according to Bloomberg.com. The overnight Libor held steady at 0.24%. Libor is a bank lending rate.
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Other markets: In global trading, most Asian markets ended higher. Japanese markets have been closed all week for a holiday. European markets rose in afternoon trading.

In currency trading, the dollar gained versus the euro and fell against the yen.

U.S. light crude oil for June delivery rose $1.51 to $55.35 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $6.20 to $910.50 an ounce.