Blue chips fall on corporate earnings gloom

NEW YORK (Reuters) - The Dow fell for the fifth straight day on Tuesday as investors fretted over what many expect will be a gloomy earnings season, overshadowing a boost in financials on bets U.S. authorities will take toxic assets off banks' balance sheets.

But the S&P 500 and Nasdaq ended higher as rising oil prices lifted energy shares and biotechnology companies gained as investors bet they will be among the few sectors with growing earnings.

Among the biggest drags, General Electric fell more than 5 percent after an analyst said the economic bellwether's profit could rely heavily on tax benefits when it reports results next Friday.

Aluminum producer Alcoa kicked off the fourth-quarter earnings season on a sour note on Monday after reporting a big loss, and its shares fell more than 5 percent.

"There's little-to-no good news forthcoming," said Marc Pado, a U.S. market strategist with Cantor Fitzgerald & Co in San Francisco.

"Everything we've seen has been earnings warnings, and we expect to see more of that."

The Dow Jones industrial average was down 25.41 points, or 0.30 percent, at 8,448.56. The Standard & Poor's 500 Index rose 1.53 points, or 0.18 percent, to 871.79. The Nasdaq Composite Index was up 7.67 points, or 0.50 percent, at 1,546.46.

Trading was volatile, with indexes moving back and forth over break-even. The broad S&P 500 has gained nearly 18 percent since hitting an 11-year low in late November, and has lost about 3 percent since the year's start last week.

The financial sector, at the heart of the credit crunch and global economic slowdown, provided a boost after Federal Reserve Chairman Ben Bernanke said in a speech in London that more steps were needed to stabilize banks, reviving the idea of authorities sopping up toxic assets from banks' books.

Optimism that Washington would work quickly on a plea by U.S. President-elect Barack Obama for the remaining $350 billion of financial rescue funds to stabilize credit markets helped offset some of the gloom, as did news the U.S. trade deficit had its biggest contraction in 12 years in November.

The S&P Financial index rose 1.4 percent, while Citigroup rose 5.4 percent to $5.90 on the New York Stock Exchange, a day after sliding 17 percent.

Citigroup is pushing ahead with a plan to sell a controlling stake in its Smith Barney retail brokerage, a crown jewel, and analysts suggested it must be urgently seeking to replenish capital due to mounting losses.

On the downside, industrial shares dragged, including Boeing , which gave up 2.9 percent at $42.46. Credit Suisse downgraded the company on concerns over problems with Boeing's 787 Dreamliner program.

GE was down 5.6 percent at $14.94 after a Barclays Capital analyst said the conglomerate's profit could rely more heavily on tax benefits than the Street expects.

Alcoa gave up 5.1 percent at $9.55 the day after it reported a bigger-than-expected loss, setting a negative tone for the start of earnings season.

Energy shares benefited from a rise in oil prices on cold weather in the United States and comments from Saudi Arabia that it had made deep production cuts. Dow component Exxon Mobil rose 1.8 percent to $77.92, while Chevron gained 1.4 percent to $71.82.

Trading was moderate on the New York Stock Exchange, with about 1.31 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2 billion shares traded, below last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on the NYSE by 1,648 to 1,434 while advancers beat decliners on the Nasdaq by about 1,503 to 1,233.

(Editing by Kenneth Barry)