Stocks fell slightly at Tuesday’s opening bell as the bulls take a breather from Monday’s big day and Wall Street braces for a report on the U.S. service sector and testimony from Fed chief Ben Bernanke.

Today’s Markets

As of 9:32 a.m. EDT, the Dow Jones Industrial Average slid 21.27 points, or 0.25%, to 8406.87, the S&P 500 fell 3.10 points, or 0.34%, to 904.14 and the Nasdaq Composite lost 8.73 points, or 0.50%, to 1754.83. The consumer-friendly FOX 50 sank 1.08 points, or 0.16%, to 664.17.

Aside from the imminent economic headlines, the markets were moved by a report that 10 major banks need to raise cash and better-than-expected earnings from Kraft (KFT).

The early slide on Wall Street comes after the Dow soared more than 200 points and the S&P 500 turned positive year-to-date on Monday. The broad S&P 500 has surged 34% since hitting a 12-year low in early March amid glimmers of hope for the struggling U.S. economy.

Traders will be looking for yet more signs of hope on Monday. The Institute for Supply Management’s service sector index, due out at 10 a.m. EDT, is expected to improve to a reading of 42.2, up from 40.8.

Also, Bernanke, the chairman of the Federal Reserve, could strike an optimistic tone when he testifies on Capitol Hill about the state of the economy.

Meanwhile, the markets continue to take the latest news about the government’s stress tests in stride. The U.S. is expected to tell 10 of the 19 banks undergoing the tests to boost their capital in an effort to ease solvency fears, The Wall Street Journal reported. The number of banks needing to raise cash remains in flux but it’s expected to include Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C), the paper reported.

While the final results are set to be released to the individual banks on Tuesday, the public won’t be privy to the information until Thursday afternoon. None of the banks will be allowed to “fail” the tests, which are designed to see how much cash banks need to withstand a weakening of the economy and shore up confidence in the most troubled sector of the economy.

Tuesday’s earnings news was headlined by Kraft (KFT), the food giant and most recent addition to the Dow, which beat the Street with a first-quarter profit of 45 cents per share. While the company’s revenue fell by a worse-than-expected 6.5%, it reaffirmed its 2009 forecasts.

In the commodity markets, crude oil joined the S&P 500 and Nasdaq by briefly turning positive year-to-date before losing steam. Crude was recently down 18 cents per barrel, or 0.33%, to $54.29

Corporate Movers

Yahoo! (YHOO) and Microsoft (MSFT) are coming closer to a search-and-advertising partnership deal, All Things Digital, the Journal’s tech blog, reported. The deal being talked about, which could be struck within weeks, would include Yahoo taking over both search and display ad sales and Microsoft running the tech for both, the blog reported

Citigroup (C) is considering putting more workers on commission or offering larger base salaries as the bank tries to keep key employees without breaking new government bonus restrictions, Reuters reported. Other possibilities include offering stock-based bonuses or a percentage of their group’s sales, the wire service reported.

New York Times Co. (NYT) and the Boston Globe union are nearing a deal that would prevent having to close New England’s largest daily paper, the Journal reported. Also, the union of the company’s flagship paper signed off on a 5% pay reduction in an effort to save 80 jobs.

General Motors’ (GM) Saturn brand has drawn interest from Roger Penske, owner of the second-largest U.S. auto retailer, the Journal reported. GM has said it has received interest from “a number” of suitors for the brand, which it is trying to unload to avoid a Chapter 11 filing.

GMAC LLC’s first-quarter loss rose by 15% to $675 million as auto financing slid 13% and its mortgage unit posted its 10th-straight losing quarter.

Eli Lilly (LLY) and Amylin Pharmaceuticals (AMLN) said they are seeking FDA approval for a new form of their Byetta diabetes treatment that is taken once a week, down from the current drug’s twice daily frequency.

Marvel Entertainment (MVL) widely exceeded estimates with a quarterly profit of 57 cents per share. The comic book publisher also upped the lower end of its 2009 earnings guidance.

Legg Mason (LM) disclosed its fifth-straight quarterly loss and slashed its dividend to 3 cents per share. However, the investment advisory firm’s loss of $2.29 per share topped the Street’s view and its revenue slid by a better-than-expected 42%.

CVS (CVS) beat the Street by reporting a first-quarter profit of 51 cents per share. The drugstore company’s revenue jumped 9.7%.

Global Markets

European markets were mixed following Monday’s rally as London’s FTSE 100 jumped 2.71% to 4358.33 but France’s CAC 40 fell 0.05% to 3236.28 and Germany’s DAX slipped 0.31% to 4887.22.

In Asia, Hong Kong’s Hang Seng rallied 0.3% to to 16430.08 while China’ Shanghai Composite gained 0.29% to 2467.34. Japanese markets were closed for a holiday.

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