* About 10 banks tested to be told to raise capital-source
* Energy shares fall along with oil prices
* Kraft shares rise after quarterly results
* Dow off 0.1 pct, S&P off 0.5 pct, Nasdaq off 1 pct
* For up-to-the-minute market news click []
(Updates to midday)
By Leah Schnurr
NEW YORK, May 5 (Reuters) - U.S. stocks slipped on Tuesday
as the recent sharp run-up tempted investors to take profits
and energy shares were pressured by a decline in oil prices.
Investors were also looking ahead to the release of
government stress test results, due on Thursday, which may show
about half of the 19 biggest banks under review need to raise
more capital.
Financial shares have helped lead the market up more than
33 percent from the March bear market lows, while the broad S&P
500 turned positive for the year on Monday, spurred by growing
optimism about the state of the banking sector and signs the
economic slump may be waning.
"We've had a really nice run," said Richard Sparks, senior
equities analyst at Schaeffer's Investment Research in
Cincinnati. "I would characterize it as being a little pause, a
little break."
The Dow Jones industrial average <> was off 12.03
points, or 0.14 percent, to 8,414.71. The Standard & Poor's 500
Index <.SPX> fell 4.70 points, or 0.52 percent, to 902.54. The
Nasdaq Composite Index <> lost 17.28 points, or 0.98
percent, at 1,746.28.
On the economic front, data showed the services sector
contracted less severely in April, providing fuel to recent
sentiment the economy may have seen a bottom.
Adding to the brighter tone on the economy, Federal Reserve
Chairman Ben Bernanke said the three-year U.S. housing bust may
be near a bottom and that he expected the recession to end this
year, barring a relapse of the financial crisis.
However, Bernanke also acknowledged growth would remain
subdued and unemployment high. [].
Chevron <CVX.N> was among the the Dow's biggest weights,
down 1.3 percent at $65.83, as oil futures <CLc1> fell below
$54 a barrel on falling energy demand.
Shares of natural gas company Chesapeake Energy <CHK.N>
slid 9.7 percent to $20.60 after it said it sees a "dramatic
reversal" of natural gas prices in fall or winter.
The KBW Bank index <.BKX> fell more than 1 percent, with
Wells Fargo <WFC.N> down 4 percent to $23.29, while Citigroup
<C.N> gained 5 percent to $3.36.
According to a source familiar with official talks between
banks and regulators, about 10 of the 19 largest U.S. banks
that have been put through government stress tests will be
instructed by regulators to raise more capital.
The banks have been negotiating with the regulators about
the depth of their capital needs should the recession prove to
be deeper and longer than anticipated. []
Investors are optimistic that the largest banks do not need
dramatic new government interventions. Among banks undergoing
the test, Citigroup, for example, has been told it will need to
boost its common equity by about $10 billion, a person familiar
with the matter said on Monday.
On the upside, Kraft Foods <KFT.N> helped cushion losses on
the Dow after the maker of household brands including Oreo
cookies and Maxwell House coffee reported a higher profit. Like
many companies this earnings season, Kraft said its results
were helped by raising prices and cutting costs, sending its
shares up 6.8 percent at $25.91. [].
(Editing by Padraic Cassidy)
