June 26 (Bloomberg) -- U.S. stocks tumbled, sending shares of General Motors Corp., Citigroup Inc. and CBS Corp. to the lowest levels in more than nine years, as credit-market writedowns and a slowing economy threatened to extend the longest slump in quarterly profits since 2002.
GM, the largest automaker, plunged the most in three years as Goldman Sachs Group Inc. advised selling the stock and oil rose by more than $3 a barrel. Citigroup led an index of financial stocks to a five-year low as Goldman analysts said the lender may report an $8.9 billion second-quarter charge and cut its dividend. Research In Motion Ltd., maker of the BlackBerry, posted its biggest drop since 2002 on concern competition with Apple Inc.'s iPhone is reducing earnings.
The Standard & Poor's 500 Index lost 25.61, or 1.9 percent, to 1,296.36 at 11:29 a.m. in New York, extending its 2008 retreat to 12 percent. The Dow decreased 229.12, or 1.9 percent, to 11,582.71, its lowest level since September 2006. The Nasdaq Composite Index sank 59.98, or 2.5 percent, to 2,341.28. Eight stocks fell for each that rose on the New York Stock Exchange.
``Most investors are going to sit on the sidelines until they're more certain the sharks have left the waters and it's safe to go back in,'' said Bruce McCain, the Cleveland-based head of investment strategy at Key Private Bank, which oversees about $30 billion. ``The writeoffs have been far worse than anyone would have imagined.''
All 10 industry groups retreated as Nike Inc.'s U.S. earnings and Oracle Corp.'s profit forecast also disappointed investors and the government reported initial jobless claims that were higher than economists' projections.
Earnings Slump
Earnings at companies in the S&P 500 slid 18 percent on average in the first quarter, the third straight retreat, according to data compiled by Bloomberg. Analysts project profits will drop 8.9 percent this quarter, according to a Bloomberg survey last week.
The S&P 500 has dropped more than 17 percent from a record in October as economic growth slowed, oil climbed to a record and global financial firms racked up almost $400 billion in credit- related writedowns. The Commerce Department said the U.S. economy expanded at an annual rate of 1 percent in the first quarter, capping the weakest six months of growth in five years, as measures of inflation accelerated more than previously projected.
Citigroup dropped $1.15, or 6.1 percent, to $17.70, the lowest level since October 1998. Goldman added the shares to its ``conviction sell'' list. The bank also lowered its recommendation on U.S. brokerages to ``neutral'' from ``attractive,'' saying the pace of deterioration in the industry ``appears to be far worse than'' it originally anticipated.
`Challenging News Flow'
Merrill Lynch & Co., the third-biggest U.S. securities firm, declined $1.61 to $33.85, a five-year low. Goldman analysts predicted the company will post a $3.55-a-share loss in 2008, compared with their previous estimate for an 8-cent profit.
``Investors can expect more challenging news flow over the summer,'' said Andreas Nigg, head of international equities at Vontobel Asset Management in Zurich, which oversees $39 billion worldwide. ``Until the housing market stabilizes and banks stop bleeding, consumer confidence will remain shaky.''
Research In Motion plunged $17.40, or 12 percent, to $124.94. Second-quarter earnings will be as low as 84 cents a share, the company said. That missed the average prediction by analysts of 92 cents, according to a Bloomberg survey. The report marked Research In Motion's first earnings disappointment in five quarters.
`Escalating Headwinds'
General Motors fell $1.42, or 11 percent, to $11.39, the steepest slide since March 2005. Lear Corp., the second-largest maker of vehicle seats, lost $3.07, or 17 percent, to $15.05. Goldman downgraded both stocks to ``sell'' from ``neutral.''
``We expect escalating headwinds from volume/mix pressures driven by gas prices, falling confidence and tightening credit,'' the brokerage wrote in a report.
GM and Chrysler LLC may face a cash crunch next year as U.S. sales decline on a slowing economy and rising gasoline prices that are pushing buyers toward more fuel-efficient vehicles, Fitch Ratings said yesterday.
Fitch lowered the issuer default ratings at GM and Auburn Hills, Michigan-based Chrysler to B-, six steps below investment grade, from B.
Chrysler spokesman Dave Elshoff said in an interview that the company has no plans to file for bankruptcy, countering speculation in financial markets.
Companies in the S&P 500 that rely on discretionary consumer spending lost 2.5 percent as a group, retreating to an almost four-year low. CBS, the broadcast controlled by billionaire Sumner Redstone, slid 61 cents to $19.58, its lowest price since October 1998.
Oracle, Nike Plunge
Oracle Corp., the world's second-largest software maker, slipped 61 cents to $21.94. The company said it expects first- quarter profit before some items of 26 cents to 27 cents a share. Analysts had expected 27 cents, according to the average of 16 estimates in a Bloomberg survey. Sales will rise between 18 percent and 20 percent, Oracle said.
Nike Inc. retreated $5.90, or 8.9 percent, to $60.073, the biggest drop since September 2001. The world's largest athletic- shoe maker said pretax income in the U.S. declined 10 percent to $390.7 million in the three months that ended May 31. U.S. orders through November were unchanged.
Lennar Corp. declined $1, 6.7 percent, to $13.57. The second-largest U.S. homebuilder reported a loss that exceeded analysts' estimates as the company was forced to cut prices to attract buyers.
Economy Watch
Initial jobless claims totaled 384,000 in the week ended June 21, unchanged from the previous week's tally that was higher than previously estimated, the Labor Department said. The total number of people collecting benefits rose by 82,000 to 3.139 million in the week ended June 14, the highest since February 2004.
The revised gain in gross domestic product was up from a preliminary estimate of 0.9 percent issued last month, the Commerce Department said.
Bed Bath & Beyond Inc. climbed $1.29, or 4.5 percent, to $29.86 for the top gain in the S&P 500. The largest U.S. home- furnishings retailer reported profit that fell less than analysts estimated because of higher sales.
The S&P 500 Energy Index lost 0.5 percent, the smallest retreat among 10 industry groups, as crude climbed.
European stocks fell after Belgium-based lender Fortis scrapped its dividend and said it will sell shares. Asian stocks advanced.
U.S. stocks rose yesterday, sending the S&P 500 to its best gain in two weeks, after the Federal Reserve said risks to economic growth have diminished and gave no indication it will raise interest rates anytime soon.
No comments:
Post a Comment